By Nick Godt
U.S. stocks ended firmly higher on Tuesday, gaining back some ground after a 680-point slide in the Dow industrials on Monday, as automakers in need of public money to survive, presented plans to return to profitability.
The market has remained very volatile, posting huge gains over five sessions, only to lose more than half during Monday's slide, which was triggered by growing concerns about the global economy.
"Bigger picture, the economy is still weakening, and there are expectations of more to come," said Robert Pavlik, strategist at Oaktree Asset Management. "We can say that a lot [of bad economic news] has been factored in, but in any case, this remains a bear market rally.
The Dow Jones Industrial Average (DJI) gained 270 points, or 3.3%, to end at 8,419, helped by a turn-around in shares of General Motors Corp. (GM).
GM's stock first fell after the automaker said its sales plunged 41.3% in November. The automaker then presented its plan to return to profitability, saying it would require up to $18 billion in federal money.
Away from the Dow, Ford Motor Co. (F) said its sales slumped 31% in November. It then asked for $9 billion to return to profitability by 2011.
Also boosting blue chips, General Electric (GE) jumped 13% after the conglomerate said it would cut more costs to reach the low end of its fourth-quarter earnings guidance and maintain its dividend.
On Monday, the blue-chip average slumped 680 points, halving its 1,277 point gain of the previous five sessions, as manufacturing data from China and the U.S. fueled concerns about the depth of the global downturn.
"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," Mendelsohn said. "Unless the world is coming to an end, there's going to be good value in this market."
The Standard & Poor's 500 index gained 32 points, or 4%, to 848. Among S&P sectors, financials led the gains, rising 8% after leading the slide on Monday.
Bucking the trend in financial shares, Goldman Sachs (GS) fell 1% after The Wall Street Journal said its fourth-quarter loss could be as much as $5 a share, five times the current analyst consensus.
The energy sector finished higher even as crude oil futures slumped more than 5% on concerns about slumping global demand.
The Nasdaq Composite jumped 51 points, or 3.7%, to 1,449.
Among tech shares, Palm (PALM) reversed an early drop to gain 7% after the Treo handheld device maker said it expects sales to fall and said it would cut jobs.
Trading volumes showed 1.6 billion shares exchanging hands on the New York Stock Exchange and 912 million trading on the Nasdaq stock market. Advancing issues topped decliners by more than 3 to 1 on the NYSE and nearly 3 to 1 on Nasdaq.
Market analysts still warned about December selling by hedge funds facing redemptions from 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.
Retail bounce
Sears Holdings (SHLD) gained 13%. It reported a widening loss as sales dropped 9%, but it did announce a $500 million stock buyback.
Another retailer, Staples (SPLS), rose 8% after reporting a 43% profit drop.
Elsewhere, home builder Beazer Homes USA (BZH) 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 said 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.
(END) Dow Jones Newswires
December 02, 2008 17:07 ET (22:07 GMT)

Publié le 02 Décembre 2008 Copyright © 2008 Dowjones