U.S. Stocks Rally After Previous Day's Slide
NEW YORK (MarketWatch) -- U.S. stocks saw early gains accelerate Tuesday, a day after the Dow Jones Industrial Average recorded its fourth-biggest point drop on record, as investors turned to prospects for a bailout of the ailing auto industry.
Monday's slide, amid concerns about the global economy, came on the heels of the Dow having its biggest five-day point gain on record.
"We're seeing extreme amounts of volatility, which is what we have at major turning points in the market," said Paul Mendelsohn, chief investment strategist at Windham Financial Services.
"I still think we're trying to put in a bottom in here," he said. "Unless the world is coming to an end, there's going to be good value in this market."
The Dow industrials was up 208 points, or 2.5%, to 8,363, with 28 of its 30 components advancing. On Monday, the blue-chip average slumped 680 points, halving its 1,277 point gain of the past five sessions, as manufacturing data from China and the U.S. fueled concerns about the depth of the global downturn.
Market analysts also pointed to selling by hedge funds facing redemptions by investors pulling their money out to meet obligations elsewhere.
"For now forced selling owing to margin calls and redemptions keeps the market value of many financial assets well under what otherwise might be warranted by fundamentals," said John Lonski, managing director at Moody's, in a note.
The Standard & Poor's 500 index gained 29 points, or 3.6%, to 846. Among S&P sectors, financials led the gains, rising 7% after leading the slide on Monday.
Energy also rose, adding 3% as crude-oil prices stabilized following a 9% slide on Monday.
Autos in play
Among blue chips, shares of General Motors Corp. gained 4.7%.
Tuesday was an important day for automakers, with monthly sales scheduled for release as the Big Three are due to submit business plans in hopes of getting Congress to approve billions of dollars in government aid. Details of the manufacturers' proposals might be released after the close of trade.
Shares of Ford Motor Co. , which reported a 31% slide in monthly sales, added 10%. Ford also made another pitch Tuesday for a federal lifeline, laying out plans to return to profitability by 2011.
Elsewhere, General Electric , another blue chip, rose 10% even after the conglomerate warned it expects fourth-quarter earnings at the low end of its previously announced range. GE clung to its dividend.
The Nasdaq Composite advanced 44 points, or 3%, to 1,442.
Bucking the trend among tech shares, Palm tumbled 12% after the Treo handheld device maker said it expects sales to fall and said it would cut jobs.
Trading volumes showed 694 million shares exchanging hands on the New York Stock Exchange and 415 million trading on the Nasdaq stock market. Advancing issues topped decliners by 4 to 1 on the NYSE and by 3 to 1 on Nasdaq.
Away from the Dow, Goldman Sachs fell 6% after The Wall Street Journal said its fourth-quarter loss could be as much as $5 a share, five times the current analyst consensus.
Retail bounce
Sears Holdings gained 16%. It reported a widening loss as sales dropped 9%, but it did announce a $500 million stock buyback.
Another retailer, Staples , rose 8% after reporting a 43% profit drop.
Elsewhere, home builder Beazer Homes USA said its fourth-quarter loss widened to $474 million from $155 million on a 35% drop in revenue.
The bond market continued to advance Tuesday, sending the yield of the benchmark 10-year Treasury bond to 2.707%.
But the dollar fell against most of its major counterparts as risk appetite made a return.
The yuan continued to fall on the heels of a slump in Chinese manufacturing, just ahead of talks between the U.S. and Beijing on Thursday and Friday.
In a speech Tuesday, Treasury Secretary Henry Paulson aid China is facing mounting economic challenges but can't use that as an excuse to let efforts to reform its economy slip.
Jobs reports ahead
While Tuesday was data free, investors were also bracing for dire data on employment starting with the ADP private-sector survey on Wednesday, followed by weekly jobless claims on Thursday, and the key November jobs report on Friday.
"This is a week that's really heavy with economic data with the employment report at the end of the week, and as we saw, it took very little to spook the market yesterday," Windham's Mendelsohn said.
Meanwhile, the market showed little immediate reaction to comments Tuesday from Philadelphia Fed President Charles Plosser, who said the U.S. economy should gradually emerge from recession in 2009 with growth picking up in the second half of the year.
By Nick Godt