Stocks higher on revived hope for auto industry

ByABC News
December 12, 2008, 5:48 PM

NEW YORK -- Stocks put on another impressive show of resilience Friday, rebounding from an early sell-off to end higher after the government said it would assist troubled U.S. automakers.

The market, which just a week earlier withstood a terrible November employment report, managed its advance after the Treasury Department said it is prepared to assist the Detroit Three carmakers. The Dow Jones industrial average had fallen more than 200 points in very early trading when it appeared that the Senate had killed a $14 billion bailout package for the companies.

"It's hard to say if this is indeed the beginning of a recovery, but it could be," said Matt King, chief investment officer of Bell Investment Advisors. "It seems like the past few Fridays we've ended the week on a positive note."

A week ago, the market shook off the Labor Department's report that the economy lost a larger than expected 533,000 jobs in November. Investors are showing a greater tolerance for bad economic and corporate news, and many analysts believe that the market may have reached a bottom after the horrific selling of the past three months.

Since its Nov. 20 low, the Dow is up 14.3%, the Standard & Poor's 500 is up 16.9% and the Nasdaq composite index has a gain of 17.1%.

Many analysts believe Wall Street is growing more confident that the government's steps to stimulate the economy, including its $700 billion bank bailout program, will work. And so news that the Treasury Department would help prevent bankruptcy filings and job losses in the auto industry helped turn the market around Friday.

"Things are looking a little bit brighter after they made those announcements," said Anthony Conroy, managing director and head trader for BNY ConvergEx Group.

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.

Some of the market's moves Friday were with an eye toward next week's Federal Reserve decision on interest rates. The two-day meeting begins Monday; the Fed is widely expected to lower its key federal funds rate half a percentage point to 0.5%, another step by the government toward lifting the economy out of recession.