Stocks recover on revived hope for auto industry

ByABC News
December 12, 2008, 3:48 PM

NEW YORK -- Wall Street set aside fears that the U.S. auto industry would soon collapse after the Treasury Department said it was prepared to funnel cash to the Detroit Three automakers. Stocks pulled off sharp losses, and edged higher in late afternoon.

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.

"Things are looking a little bit brighter after they made those announcements," said Anthony Conroy, managing director and head trader for BNY ConvergEx Group. "Anytime there's indecision, that indecision breeds volatility. And that's what we were seeing."

Stocks fell sharply in the early going after a $14 billion rescue package for the automakers was derailed in the Senate late Thursday when 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.

"The market's been pretty resilient," said Matt King, chief investment officer of Bell Investment Advisors, noting that Wall Street has at times since mid-November advanced even in the face of bad news. "The market's been holding firm and making some good gains. So to us that's a good sign."

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.