Stocks turn mixed on revived hope for auto industry

NEW YORK -- Wall Street reined in its fears about a collapse of the U.S. auto industry and cascading job losses Friday after the Treasury Department said it would step in to prevent a collapse of the Detroit Three automakers. Stocks came off of sharp early losses and traded in a more moderate range.

After falling 217 points at the open, the Dow Jones industrial average and other indicators began to pare their losses after White House and the Treasury said they are considering diverting money from the Wall Street rescue fund to stave off bankruptcy filings among the carmakers.

"The market just wants some clarity on the issue," said Matt King, chief investment officer of Bell Investment Advisors. "It's unknown if a bailout is going to get pushed through and if it does what it is going to look like. A degree of clarity will help the market's fears."

Stocks initially fell sharply Friday after a $14 billion rescue package for the automakers was derailed in the Senate late Thursday after the United Auto Workers refused to meet Republican demands for big wage cuts. Lawmakers have called on the Bush administration to use a portion of the $700 billion financial rescue to help the car companies.

General Motors and Chrysler have said they could run out of cash within weeks without government help. Ford Motor, which would also be eligible for aid under the bill, has said it has enough cash to make it through next year.

"A lot of the gloom about the course of these automakers is pretty much discounted," said Ken Mayland, president of research firm ClearView Economics. "So yes there was no agreement last night, but that's not coming as a huge shock."

The failure of the bill is feeding investors' concerns about job losses. More evidence of the battered labor market came late Thursday, as Bank of America said it expected to cut as many as 35,000 jobs over the next three years, including some from investment bank Merrill Lynch, which it agreed to buy in September.

The Dow tumbled 196 points Thursday as worries intensified that the auto bill would stall in the Senate.