Wall Street bounced back from its two ugliest sessions in decades on Friday even though a new report showed the U.S. lost more than 500,000 jobs in the past two months alone.
Despite Friday’s rally, which was nearly erased after President-elect Obama’s first press conference, the markets ended the tumultuous week deeply in the red.
Today's Market
The Dow Jones Industrial Average jumped 248.02 points, or 2.85%, to 8943.81, the broader S&P 500 added 26.11 points, or 2.89%, to 930.99 and the Nasdaq Composite picked up 38.70 points, or 2.41%, to 1647.40. The consumer-friendly FOX 50 gained 19.92 points, 2.89%, to 708.87.
Analysts attributed the solid end to an ugly week to relief that the October jobs report, which showed the unemployment rate soared to the highest level since 1994, wasn't as bad as Wall Street had been bracing for.
“The jobs number was terrible, clearly but there were even worse-case expectations than what was reported. The negativity of the jobs number was already factored in,” said Michael James, senior equity trader at Wedbush Morgan Securities, citing the enormous losses over the prior two days.
The markets also shrugged off a new report from Goldman Sachs calling for the economy to sharply contract this quarter and a warning from General Motors (GM) that it is quickly running out of cash.
The gains helped ease the pain from a post-election selloff that slashed nearly 1,000 points from the Dow -- its worst two-day point decline in history and steepest percentage plunge since October 1987.Even still, the blue-chip index lost roughly 400 points this week amid a series of new reports that shed light on the precarious state of the U.S. economy.
Nearly all 30 stocks on the Dow ended in the green on Friday, led by aluminum maker Alcoa (AA) and chip maker Intel (INTC). ExxonMobil (XOM) and DuPont (DD) also rose sharply. On the other hand, General Motors plummeted after issuing a liquidity warning and weaker-than-expected results.
All eyes on Friday were on the Labor Department's highly anticipated monthly employment report that revealed the U.S. lost a massive 240,000 jobs in October, a significantly worse reading than economists had expected. The government also sharply lowered its estimate for September to show the nation lost 284,000 jobs -- the worst losses since November 2001.
The government also said the nation's unemployment rate surged from 6.1% to 6.5% in October -- the highest level since March 1994.Economists had forecasted a more modest rise to 6.3%. The U.S. has now seen about 1.2 million jobs disappear this year alone.
But stocks rose anyway because many had feared the job losses would be even steeper.
The jobs report also raises the prospects the government will act by further slashing rates to 50-year lows and by unveiling an aggressive economic stimulus package. Still, the report bolsters fears the U.S. is in the most severe recession since the early 1980s.
The nation's labor market suffered another blow Friday when auto giant Ford (F) said it will slash 10% of its salaried workforce as it fights to stay alive amid plunging sales and a weakened credit market. Ford reported another quarterly loss on Friday, saying it lost $129 million, or $3 billion on an adjusted-basis. The per-share loss of $1.31 was worse than expected.
The news was even bleaker from General Motors(GM), which warned that, even with a series of new liquidity measures, it will likely run out of cash in the first half of 2009, narrowing the timeline until it needs a potential government rescue from bankruptcy.GM and Chrysler both said they stopped talks of a merger to focus on their liquidity challenges.
GMreleased an adjusted-loss of $7.35 per share on $37.94 billion in sales in the third quarter, missingWall Street's already lowered expectations. GM cited a perfect storm of pressures on consumers, leading to plunging sales.
The markets suffered a mid-afternoon plunge after Obama spoke about his effort to guide the U.S. out of the "greatest economic challenge of our lifetime."
"Immediately after I become president I will confront this economic crisis head-on by taking all necessary steps to ease the credit crisis, help hardworking families, and restore growth and prosperity," said Obama.
Obama also said a fiscal stimulus plan is long overdue and it will be his first priority if one isn't passed by the lame-duck Congress. However, the comments didn't appear to be what Wall Street was looking for as the Dow plummeted more than 150 points during his press conference before recovering.
Friday’s big gains also came in the face of a new bleak economic forecast from Goldman Sachs, which now sees a 3.5% plunge in GDP in the current quarter and a 2% decline to start 2009. Goldman predicts unemployment will soar to 8.5% by the end of next year -- the highest level since November 1983.
“Things aren’t going to get any better any time soon. It’s a question of whether stock price valuations have already accounted for any more negativity,” said James.
Meanwhile, crude oil futures made modest gains Friday following a two-day plunge of almost $10. The price of a barrel of crude ended up 27 cents to $61.04.
Corporate Movers
Yahoo! (YHOO) plunged after Microsoft (MSFT) CEO Steve Ballmer said he’s not interested in making another run at the Internet company. “We made an offer, we made another offer…We move on,” the exec said Friday, just days after Yahoo’s ad-search deal with Google (GOOG) fell apart.
General Motors (GM), Ford (F) and Chrysler LLC told Congressional leaders they would sign off on provisions such as stock warrants tied to a new emergency loan from the government that could bring aid as high as $50 billion, The Wall Street Journal reported.
Sprint (S) fell sharply after the telecom giant reported break-even adjusted-results and a 12% decline in revenue to $8.81 billion in the third quarter. Analysts expected stronger results of a profit of 3 cents on $8.86 billion in sales. Sprint also lost a greater-than-expected 1.1 million postpaid customers in the quarter.
Motorola (MOT) lost its status as the national leader in seller of handsets to Samsung in the third quarter, according to a new research report.
Data Dump
A real-estate industry group said pending home sales tumbled by a worse-than-expected 4.3% in September, the fifth monthly decline in the last 8 months. However, the National Association of Realtors also said sales were up 1.4% from a year ago, the second consecutive rise in sales.
The government said wholesale inventories unexpectedly fell by 0.1% in September -- the first monthly decline in 11 months. However, the tumbling inventory levels didn’t come close to the 1.5% decline in sales.
World Markets
Global stock markets were mostly higher onFriday. The Dow Jones Euro Stoxx 50 closed up 60.50 points, or 2.38%, to 2602.54 and London's FTSE 100 added 92.55 points, or 2.17%, to 4364.96.
In Asia, Japan's Nikkei 225 plunged 316.14 points, or 3.55%, to 8583.00 while Hong Kong's Hang Senx Index jumped 453.39 points, or 3.29%, to 14243.43.
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