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Wall Street extends big rally to 2nd session

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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.

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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