Wall Street extends big rally to 2nd session

NEW YORK — The stock market showed renewed confidence Monday, extending its rally and lifting the Dow Jones industrials to their highest level in a month following President-elect Barack Obama's promise to increase infrastructure spending to lift the economy.

The Dow advanced nearly 300 points, gaining 560 points in the last two sessions to extend a period of relative tranquility on Wall Street. The Dow and the Standard & Poor's 500 have risen in nine out of 11 sessions with investors absorbing bad economic news without signs of the panic that rocked the market for much of the fall.

The Dow rose 298.76, or 3.46 percent, to 8,934.18, its highest close since it finished at 8,943.81 on Nov. 7. The blue-chip index, which added 259 points on Friday, is now up for December.

Broader indexes also rose. The Standard & Poor's 500 index advanced 33.63, or 3.84 percent, to 909.70; and the Nasdaq composite index jumped 62.43, or 4.14 percent, to 1,571.74.

The Russell 2000 index of smaller stocks rose 20.29, or 4.40 percent, to 481.38.

Obama's plan calls for the largest U.S. public works program since the creation of the interstate highway system a half-century ago. That could bolster the economy by putting thousands of people to work building schools and other construction projects.

His weekend announcement lifted a range of companies, from machinery makers to materials producers. Alcoa Inc., the world's third-largest aluminum producer, surged 18 percent on the news; while heavy-equipment maker Caterpillar Inc. jumped 11 percent.

Investors also grew more confident as the government neared a deal to dole out billions to America's three biggest automakers. The White House said Monday that it was "very likely" to strike an agreement with Congress on funneling money to General Motors Corp., Chrysler LLC and Ford Motor Co. The package is expected to total about $15 billion.

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The stock market has surged despite a host of bad economic news, including Friday's Labor Department report that showed the nation lost more than a half million jobs last month. The report raised hopes that the government would take more steps to stimulate the economy.

"I think people recognize that the government is going to throw everything that they can at this market, everything they can at the economy to make it work," said James Cox, managing partner at Harris Financial Group. "We had bad jobs numbers on Friday. To be able to overcome those type of job losses and have that kind of rally, that is technically significant. If that doesn't make you bullish, I don't know what does."

Still, many analysts, cognizant of the fact that recoveries from bear markets tend to be tumultuous, were still cautious despite the market's recent string of gains.

"My gut feeling is investors aren't going to quite believe this rally and there is probably going to be some profit taking," said Tobias Levkovich, chief U.S. equity strategist at Citigroup Inc. "There are a lot of different balls bouncing in the air right now. You still have a pretty jittery investor base out there."

While big moves in stocks have continued in recent weeks the trading has much of the time been more orderly. There have been some gyrations, like a 680-point drop in the Dow on Dec. 1, but some market observers contend that the market is slowly forming a bottom. Stocks are up sharply from Nov. 20, when the benchmark S&P 500 finished at its worst level since April 1997. Since then, the S&P 500 is up 20.9 percent, the Dow is up 18.3 percent and the Nasdaq is up 19.4 percent.

Bond prices fell as investors put money back into stocks. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.74 percent from 2.70 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, was unchanged at 0.01 percent, still indicating a high degree of investor uneasiness.

The dollar was mixed against other major currencies, while gold prices rose.

David Kelly, chief market strategist at JPMorgan Funds, said professional investors are being drawn to the market by cheap stock prices and a sense that while the economy is weak now it will eventually begin to regain its strength.

"The reality in the economy is it's getting worse but eventually the economy will turn around," he said. "Even if the economy is lousy in 2009 stocks are a long-term investment and are cheap."

But Scott Fullman, director of derivative investment strategies with WJB Capital, warned that the move higher for U.S. markets should be treated cautiously. He said credit still remains tight around the world, and that there are still a number of other worries hanging over the market.

"I'd be very cautious about jumping in with both feet and expecting what could be a Santa Claus rally going into the New Year," he said. "The fact is, we're not seeing the credit markets opening up, we're not seeing buying of the distressed debt, and that leads to additional worries for stocks."

With little in the way of economic data to trade on, investors closely monitored corporate news for direction.

Among the automakers, GM rose 85 cents, or 21 percent, to $4.93, while Ford rose 66 cents, or 24.2 percent, to $3.38. Chrysler isn't publicly traded.

Consumers hungry for a deal boosted worldwide sales at McDonald's Corp.'s established locations by 7.7 percent in November. The company said that U.S. same-store sales _ or sales at locations open at least a year _ rose 4.5 percent. Shares of the company fell $1.80, or 2.9 percent, to $60.92.

Tribune Co. filed for bankruptcy Monday, as expected. The privately held owner of the Los Angeles Times and Chicago Tribune, other newspapers and the Chicago Cubs and Wrigley Field, is struggling with $13 billion in debt. A steep slump in advertising revenue has hurt the company. Most of its debt stems from a complex transaction in which the company was taken private by real estate mogul Sam Zell last year.

Oil prices bounced off four-year lows after OPEC's president suggested the group could surprise investors with a large production cut later this month. Light, sweet crude rose $2.90 to settle at $43.71 a barrel on the New York Mercantile Exchange.

The move higher follows a global rally as investors took heart from signs the world's largest economies are redoubling efforts to revive growth. In China, government officials this week are meeting to discuss possible new steps to expand the $586 billion stimulus that is already in place.

Stocks that rose outpaced those that fell by about 4 to 1 on the New York Stock Exchange, where consolidated volume came to 6.42 billion shares compared with 6.03 billion shares traded Friday.

Hong Kong's Hang Seng index vaulted 8.7 percent to its highest close in seven weeks, while Japan's Nikkei 225 average rose 5.2 percent. Major European bourses also showed big gains. Britain's FTSE-100 climbed 6.2 percent, Germany's DAX jumped 7.6 percent, and France's CAC-40 surged 8.7 percent.

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On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

Comments

[Joseroncal]

Obama's Plan Sends Markets Up, But For How Long?

The big news of Monday was the DOW hitting the 9,000 mark. The big question now is, "Have we hit bottom"? Our answer is, "Maybe, but don"t rush into anything on a single day"s news just because you"re worried that you might miss out."

The pundits tell us, "The market is a discounting mechanism." But relying on market "fundamentals" falls far short of explaining what"s really happening. Colorful trend charts can"t gauge the true intentions of buyers and sellers, and plugging in discount rates, risk premiums or annualized growth rates into a formula is no measure of the true fair market value of a financial asset.

The worldwide crisis isn"t going to get fixed over night. I expect further volatility in the days ahead. For instance, when corporate earnings are released in January, it could trigger more volatility. Things are likely to continue like this well into 2009 or 2010.

A situation that began as a housing crisis has turned into the worst financial crisis since the Great Depression. More than $31 trillion has evaporated through equity and debt losses. And the write-downs on the books of the world largest lenders and investors is approaching $1 trillion. The fact remains that all of this was predicted in our book "The Big Gamble: Are You Investing or Speculating?" by Jose Roncal and Jose Abbo.

For more information visit: www.financialspeculation.com

[SailFree]

http://online.wsj.com/article/SB122878208553589809.html

When Charles Schwab speaks, people should listen.

[Sundialsvc4]

One day Wall Street will rally, the next day Wall Street will fall.

Wall Street does not care: all they really want is "volatility," because in the final analysis, what Wall Street actually sells is "transactions."

The market is going up, so you should hurry up and buy. The market is going down, so you should hurry up and sell. "Twenty-five cents, please."

[robjh1]

Wall Street always seems to rally when money is thrown its way or is about to be thrown its way. How convenient.

[brooklyncitizen]

Partly true. It's also that people are reassured by someone who is a leader and is confident enough to inspire trust. So much of what we do is psychological. One look at Bush and who doesn't have an adverse reaction?

[obasome]

the only thing that been moving the stockmarket is the presidents working group or..."plunge protection team"

obamas decisions have nothing to do with it

[Sundialsvc4]

I have a plunge protector in my bathroom. Don't have to use it too much 'cuz the plumbing's real clean.

But come to think of it, I do understand why the finance people and "guv'mint" folks might need to use such a device a whole lot. . . .

[Lucky dog]

If President elect Obama really wants to put 2.5 million Americans back in the work force the solution is quite simple. Basically a trickle up economics.. Lets look at 2.5 million New Jobs. I purpose hiring 400,000 temporary immigration enforcement officers at say 25k per year to round up about 2.5 million Illegal undocumented workers, at a cost of 10 billion so that Americans can do the construction and service jobs. Now part 2

Give vouchers to people living in the inner city and older neighborhoods to do energy saving construction projects in homes and schools and low income apts.Insulated windows and doors, weatherstripping and insulation. High efficiency heat pumps instead of the heating oil used in so many older homes.Insure that Legal construction workers do the work, and increase demand for American made construction materials. The end result being energy conservation, an ongoing cash savings to the neediest people, which of course they will spend in the local economy, increasing the tax base. Actually I know of a window manufacturer in Illinois that has plenty skilled workers and an overstock of unsold inventory.

[Marcospinelli]

The big 3 auto companies have to be nationalized and put to work creating green vehicles, mass transit systems (buses and trains).

With all due respect to Obama, a massive infrastructure program isn't going to jumpstart this economy. Putting Americans to work tarring roadways is work for chain gangs, prisoners, not middle-class white collar American workers.

What the bailout was supposed to do was to get money into Americans' hands so that they'd start buying again. That didn't happen for two reasons - 1) Banks didn't get the money to Americans because they've decided we are bad risks, and 2) Had we gotten the money, we would have saved it for the hard times ahead or paid on our existing debt.

Forgiving Americans' debts, wiping out what we owe is what it's going to take to get the engine going again. Congress must then undo the Bankruptcy Reform Act that Democrats like Dianne Feinstein signed on to a couple of years ago, where credit companies could charge usury rates.

Reregulating business must happen, too, as well as restructuring and reregulating accounting systems.

And once that has happened, never letting another Republican get anywhere close to "reforming" government.

WIPE OUT CONSUMER DEBT!

[KathyinCT]

Your world view is remarkably limited, and stupid. The projects Obama proposes to fund will create far more jobs than "tarring roads." For every building construction project, for instance, there are skilled tradesmen, and accountants at the construction companies, and workers at restaurants who feed the workers . . . . . I mean think about it. Converting to a full Electronic Medical Records system will occupy thousands and thousands of "white collar" workers as you refer to them (alert -- your snobbishness is showing).

And by the way, there's not a damned thing wrong with manual labor, you jerk. The guys you see out there building your highways or constructing buildings are not CHAIN GANG PRISONERS.

How disgusting your comments are.

[Marcospinelli]

The kind of labor that these projects require is not the kind of work most Americans who are out of a job can do. This is the kind of work that is performed by young, fit, healthy men. It doesn't require advanced degrees. It puts very few people already in the US to work.

In these times of the Bush Patriot Act, and the NSA listening in on American citizens, and where insurance companies deny payments and coverage at the drop of a hat, AMERICANS WANT THEIR PRIVACY BACK.

We don't want an electronic medical records system with our personal histories there for the hacking. We especially don't want this kind of information going to trained workers in foreign nations, as it already is being done by. Our government paperwork is currently being performed by workers in India and other nations.

The infrastructure projects Obama is proposing didn't work to get the nation out of the Depression in the 1930s, and won't work now.

[Marcospinelli]

You need to get control of your mouth.

[Emlyn]

Oh, I see you are in debt and you don't want to have to pay your bills. In 1994, we had a massive earthquake in California. there are bridges that still have not been fixed because we didn't have the money. Our gas tax money was taken from us to pay for schools and other things. We need depserately the Expo Line from downtown Los Angeles to Santa Monica. Traffic on the west side of Los angeles is impossible during rush hour. And we are not the only state in the union that needs roads and bridges fixed. There hasn't been a massive overhaul of anything in this country in years.

[Marcospinelli]

I wouldn't try to guess that everything you read here is motivated by personal interest and greed, and try to make these personal arguments, Emlyn.

As it happens, I'm one of the very few in America who isn't in debt. I didn't refinance my house during the Bush years, but I did just before. I hoped that it would steadily appreciate in value so that when I retired I could either sell it & move to a smaller home or apartment or do a reverse mortgage for my living expenses until I died. Unfortunately, that can't happen now because my home is now worth slightly more than I paid for it & I still have many years to keep making mortgage payments on it.

Los Angeles, like most other cities designed & built up after WWII, can't continue to operate with its citizens driving their own cars long distances to get through their day. It's bad for the environment, bad for health, & bad on the wallet.

US consumers are bad risks & our purchasing power is now nil. Our interstate highways & roads were designed & built for the movement of goods, not for our driving enjoyment. If we can't purchase anything, if we can't buy, & if we don't manufacture anything, what are we repairing these roadways for?

Who is going to be buying those goods & having them delivered on these roads to our homes? Or should I say what used to be our homes?

There's a

[Sundialsvc4]

I agree with the previous poster, Emlyn: this is not an issue of "you don't want to have to pay your bills."

The problem is that millions of people "bought" houses for vastly inflated prices. Today, the prices they could get by selling the house do not even come close to "what a willing buyer would pay a willing seller." On paper, they're in debtor's prison for the rest of their lives.

But how much cash actually changed hands?

They (maybe...) put down a down-payment and they've been making regular payments since that time. The rest of the money is more-or-less imaginary. Someone out there has "a security interest," or some fraction thereof, but there's no collateral. And the homeowner isn't going to remain underwater: under good conditions, he'll walk away. Under bad, he'll burn the house to the ground before he leaves.

A far better strategy for all concerned is to forgive such amount of "paper debt" that what remains once-again fairly reflects the value of the home as set by "a willing buyer meets a willing seller today." Give the homeowner a small amount of equity, and a loan principal amount he can actually pay. Presto: the loan is once again a performing asset.

On paper, "gobs of money just vanished." But... that money did not exist anyway. We can wipe-away numbers on ledger books. What we don't want are burned houses and homeless people.

[leftLibertarian]

Wall Street loves Big Mommy Gummit.

[Rule Of Law]

This just in:

Market moves up AND down in the same day on absolutely no news at all! Pictures at 7!

Seriously, do these financial "writers" just have a big spinning dart board they use to pick a headline?