Wall Street Rallies In First 2009 Session

Despite Weak Manufacturing Report, Dow Closes Above 9,000 For First Time Since Nov. 5

(AP)  Wall Street started the new year with a big rally Friday, as investors, brushing aside a disappointing report on manufacturing, sent the Dow Jones industrials up more than 250 points and to their first close above 9,000 in two months. All the major indexes shot up more than six percent for the week.

The Institute for Supply Management said its manufacturing activity index fell to the lowest level in 28 years in December. But the market held to its recent pattern of taking bad economic news in stride, a pattern that began to emerge after it touched multiyear lows on Nov. 20. Investors tend to look anywhere from three to nine months into the future when they make their moves.

"Over the last month you've started to see a change in sentiment and this certainly advances that," said Carl Beck, partner at Harris Financial Group in Richmond, Va.

Economic data have been terrible for months and investors have shown little surprise even as some readings fell well short of economists' already low expectations. During past recessions, the market has recovered ahead of the economy by growing numb to a stream of poor data and looking for signs that the downturn isn't worsening.

The ISM, a trade group of purchasing executives, said Friday its manufacturing index fell to 32.4 in December from 36.2 in November. Economists polled by Thomson Reuters had expected a reading of 35.5; a figure below 50 indicates contraction.

Wall Street's move higher comes amid light trading after the New Year's holiday. Modest volume can lend buoyancy to the market as upbeat buyers have reason to come out and those with less conviction stay home.

The final session of the week follows a terrible year for investors. The Dow fell 33.8 percent in 2008, its worst performance since 1931.

Still, the market's move higher was welcome.

"We like to see the markets shrug off the bad news. That typically is a sign that we're forming a bottom," said Eric Thorne, an investment adviser at Bryn Mawr Trust.

According to preliminary calculations, the Dow rose 258.30, or 2.94 percent, to 9,034.69, finishing the week up 6.1 percent. The blue chips last closed above 9,000 on Nov. 5, when they stood at 9,139.27.

Like the Dow, broader stock indicators also advanced for the third straight session. The Standard & Poor's 500 index rose 28.55 percent, or 3.16 percent, to 931.80, its highest close since Nov. 5. The Nasdaq composite index rose 55.18, or 3.50 percent, to 1,632.21.

For the week, the S&P 500 finished up 6.8 percent, while the Nasdaq rose 6.7 percent.

The Russell 2000 index of smaller companies rose 6.37, or 1.28 percent, to 505.82.

Advancing issues outnumbered decliners by about 5 to 1 on the New York Stock Exchange, where volume came to a light 1.04 billion shares.

Bond prices fell as investors took on riskier assets. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.40 percent from 2.22 percent late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.09 percent from 0.08 percent Wednesday.

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

Light, sweet crude rose $1.74 to settle at $46.34 a barrel on the New York Mercantile Exchange.

Thorne contends 2009 could be a strong year for Wall Street because most investors are so shaken from the sell-off in 2008, which erased six years of gains in stocks. Market bottoms often emerge because investors are so pessimistic or because stocks seem incapable of making any sustained recovery.

"A bottom isn't formed in one day or even in one month but probably over several months," he said. "Expectations are extremely low for the economy, for corporate earnings and for the stock market itself."

From Nov. 20 to the end of 2008, the Dow advanced 16.2 percent, while the S&P 500 rose 20 percent.

"We're very confident that the $9 trillion that is in cash right now will look to find a home in better-performing assets," he said, referring to the amount of money invested in conservative but low-yielding areas like money market funds. Yields on safe investments like Treasurys have fallen to virtually nil as investors have clamored for safety and surrendered hopes of even earning a return on their money.

Todd Leone, managing director at Cowen & Co., cautioned against reading too much into Friday's advance and said the first full week of the new year should provide insight into investor sentiment for 2009.

"The first five days are usually very telling," Leone said. "I'm not sure we'll be up or down." He said an advance in stocks Friday wasn't a surprise as some investors start the year by wading into the market. He said selling is more likely to occur next week.

Investors had little corporate news to go on Friday other than the completion this week of some major banking acquisitions. Bank of America Corp. finalized its deal to acquire Merrill Lynch & Co. Wells Fargo & Co. closed its acquisition of Wachovia Corp., while PNC Financial Services Group Inc. bought National City Corp.

The dealmaking came after the mortgage and credit turmoil torpedoed bank's balance sheets and sent banks' stocks tumbling. In some cases, banks grappling with liquidity shortages and rising loan losses were forced to make deals to remain in business.

Next week brings a flurry of economic readings and potentially early comments from companies on their 2008 results and 2009 forecasts.

A Labor Department report next Friday on December employment is expected to draw attention. A month ago, Wall Street showed newfound resiliency in the face of a bad reading on what is typically the most important economic report of the month. Stocks initially sagged but finished with big gains Dec. 5 after the government reported that employers slashed a larger-than-expected 533,000 jobs in November. Investors were hoping the poor report would prompt Washington to take broader steps to shore up the economy.

"The employment numbers will almost undoubtedly be very ugly. What will be interesting to see is what the market's reaction will be to those numbers," said Thorne. "We're also very interested to see what the corporate earnings reporting season will be like."

Harris Financial's Beck said the earnings reports could be a wake-up call for investors. "People expect earnings to be really bad. If they come out and they're not quite as bad, you could see this momentum in the market continue," he said. "If they come out even worse than expectations, that could be a major set back."

Stocks overseas also began the new year with a rally. Britain's FTSE 100 rose 2.88 percent, Germany's DAX index jumped 3.39 percent, and France's CAC-40 increased 4.09 percent. Markets in Japan were closed for a holiday.

[incog-nito]

People who think that the economy will "eventually" recover are deluded. The permanent job loss due to globalization had begun long before the current economic downturn, and will not end any time soon. With foreign labor a tiny fraction of the cost here, why would any corporation stick around unless they absolutely have to? Are American workers that much more productive than their foreign counterparts? Highly doubtful. Americans would have to be five or ten times more productive to make up for the cost differential. If it weren''t for deficit spending and living on borrowed means, the recession would have started a long time ago. Sorry folks, but there ain''t going to be any recovery this time.

[stinginrich]

We''ll see maybe 9200 on the Dow before it rolls over and dives to new lows. Starting Monday, when all the Scumbags come back from the Islands after the Holidays, the really bad news will start to be released.
Get ready for bend-over-and-kiss-your-azz-goodbye time.....

[nor-one]

The way Liza Minelli was cheering at the closing bell I can only assume that drug stocks peaked. Might help the costs on the street.

[debinok1]

Excerpt from NY Times:

Nouriel Roubini at New York University, who called the 2008 market disaster correctly, wrote in a recent commentary on Bloomberg News that he foresees %u201Ca deep and protracted contraction lasting at least through the end of 2009.%u201D

Even in 2010, he added, the recovery may be so weak %u201Cthat it will feel terrible even if the recession is technically over.%u201D


Wall Street continues to listen to the economists that use those computer models that say the economy is basically stable. And msm tries to get the consumers to buy into it.

[unlresources]

Alright everyone get out your scratch-off lottery tickets...we have a better chance of winning the lottery than an economic recovery! One other bit of advice make sure you bring down the arm on the ride during this rollercoaster trip.

[jsutaguy]

You''ve really got to read this article by the Washington Post. http://tinyurl.com/6emukq

This top-rated piece of investigative reporting shows that Wall Street took BILLIONS out of each of our pockets by cornering the Oil markets in 2008, controlling 81 percent of all oil contracts in the world. They plan to do the same in 2009. This story was ignored by CBS, NBC, ABC, FOX, CNN.

Cut and paste this and pass it on.

http://tinyurl.com/6emukq

As the article points out, these same Wall Street firms plan to do the same thing to the price of everything we eat or drink, using the same cheap money they are getting from our treasury, in 2009.

Why are we paying to keep these firms in business?

Why are our taxes being used to keep them operating?

They aren''t lending money to real businesses, they aren''t helping our economy, they simply aren''t necessary for America...they are only used by the very richest parasites who are destroying our country and dictating its policies by buying out our government. Wall Street has clearly taken control of the CFTC, which is the Federal Agency that is paid to prevent speculators from cornering markets and illegally driving up prices. The CFTC, prior to this Washington Post report, laughably said that Gasoline prices were simply %u201Csupply and demand%u201D. This is simply a lie. Our gov has sold out.

[whitemale08]

Go ahead, gamble your life away.

If you haven''t beat the market the last time you might get lucky this time.

[chelokee]

Wall Street is a joke. Up and down, up and down, up and down, up and down. Go to the horsetrack.

[fahren451]

The market remains the only place for middle income families to realize a net gain on investments for the long term. This is one of those "most excellent" times to invest.

Posted by HETUP at 07:02 PM : Jan 02, 2009

That is pretty funny. The bloated market has lost 40 some percent. Tell that to folks whose 401k and pension are ash.

Maybe you should have a caveat; if you are out of the market before the next implosion, you will realize a return on investment.

I take it you were being sarcastic.

[hetup-2009]

The market remains the only place for middle income families to realize a net gain on investments for the long term. This is one of those "most excellent" times to invest.

[ballpen1]

Could someone please make clear that Wall Street and Main Street are no longer connected, please! It''s more like Vegas: "What happens in Vegas stays in Vegas".

These enormous bubbles we had, on the stock market, the housing market, the energy market, they are all fabricated, all part of a scheme to suck all our money into someone elses pocket.

If you want to judge the economy don''t turn to Wall Street, turn to unemployment reports, the GDP, import/export statistics, anything. Just don''t let them manipulate you AGAIN!

[heartlandjim]

While the first string has been away for the last week the second string wants us to think there''s a big rally coming. There is no good news except we are going to start printing money. Look out for another big drop next week to take the suckers money away again.

[david1737]

According to AAUP and IES, the average annual compensation for a college professor in 2006 was $92,973 (average salary nationally of $73,207 + 27% benefits).

According to money.cnn: ''''''''''''''''The average income of the bottom fifth of families was $18,116; the middle fifth, $50,434; and the wealthiest fifth, $132,131.''''''''''''''''

Republican party is corrupt through and through. ....


Posted by ms1-1-1 at 03:02 PM : Jan 02, 2009


Add the fact that the salary of a CEO is 400 times that of the average employee (of American corps.) vs. the European CEO at 11 times that of their average employee, and you can begin to see the huge divide between the "haves and have nots" in America.

[McHineguy]

The market is looking ahead over the next few months and seeing one word- stimulus. The Dow will gain at least 1,000 points by the end of February. Housing and new mortgages will set records. It will happen. It is already happening.


--------------------------------------------------------------------------------

Posted by ghostfighter at 05:50 PM : Jan 02, 2009

I will partly agree with you. The market sees two words, STIMULUS and INFLATION. Most of american pensions programs and charities are heavily invested in the stock market. They know that the simulus will spakr a new roudn of inflation and want to be invested in stocks that will go up with it as well as benefit from stimulus money. But, total spending power will decline.

[serf_1]

The market will be below 6000 by the third quarter.

[credibility2]

Gettelfinger gets paid over $158k just for being the UAW President. It''s also reported that the UAW has nearly $2B in assets, including a luxury resort and golf course. So, how is this any different than the big-3 CEOs arriving in their jets, tin cup in hand? Gettelfinger is a whiner and a complainer.


http:/www.unionfacts.com/unions/unionProfile.cfm?id=149

[credibility2]

Ignoring reality isn''t the answer.