Wall Street successfully avoided a NewYear's hangover on Friday as the Dow surged more than 250 points to end above the pivotal 9000 level for the first time since earlyNovember.
The bullish start to 2009 came as traders shrugged off a new report showing manufacturing activity plunged to 1980 levels last month, instead focusing on a potential rebound from the Dow's worst year since the Great Depression.
Today's Markets
The Dow Jones Industrial Average added 258.30 points, or 2.94%, to 9034.69, the S&P 500 jumped 28.55 points, or 3.16%, to 931.80 and the Nasdaq Composite picked up 55.18 points, or 3.50%, to 1632.21. The consumer-friendly FOX 50 added 20.86 points, or 3.02%, to 711.45.
"One day doesn't make a month or a year. Clearly, this is sort of a relief rally that started in the middle of last week," NYSEtrader Ted Weisberg of Seaport Securities told FOXBusiness. "Stocks on balance continue to be overall, I think, inexpensive."
The markets ended near session highs as the Dow closed above the psychologically-important 9000 threshold for the first time since November 5, when it ended at 9139.27.
The big gains have to be taken with a grain of salt as trading volume was very low due to the holiday-shortened week. By the time the closing bell rang, the New York Stock Exchange composite volume was barely at 1 billion shares, compared to a full day's average of 1.3 billion shares.
“It was really just a lack of sellers and buyers feeling better about the prospect for the economy under the Obama administration," said Michael James, senior equity trader at Wedbush Morgan Securities. "Before you put too much credence in today’s rally, we need to see what happens Monday and Tuesday when there is a fuller slate of market participants.”
All but one of the 30 components of the Dow ended up by at least 1%, led by big gains for General Motors(GM) and aluminum titan Alcoa (AA), two of the index's worst performers in 2008. Boeing (BA) and Citigroup (C) also saw their shares jump. On the other hand, JPMorgan Chase (JPM) barely closed in the green.
The Nasdaq Composite outpaced the broader market, led by double-digit percentage gains for SanDisk (SNDK). Other tech stocks like Electronic Arts (ERTS), Apple (AAPL) and Sun Microsystems (JAVA) also saw heavy buying.
There's no doubt Wall Street is eager to turn the page on the collapse of 2008. Amid a steep recession and scary financial crisis, the Dow lost 33.8% in 2008, its worst performance since 1931's 52.7% decline. The historical comparisons were even worse for the Nasdaq Composite, which lost 40.5% of its value in 2008, its worst percentage decline in history.
In sharp contrast to the ugly year that just ended, stocks closed higher in the final two trading days of 2008, including triple-digit gains on Wednesday that represented the best last day of the year for the Dow since 1974.
Markets Shrug Off Data
On the economic front, the Institute for Supply Management's manufacturing index reminded Wall Street that while the calendar has changed, the U.S. economy remains very weak. The private research group's manufacturing index plummeted to a worse-than-expected reading of 32.4 in December, the lowest level since December 1980.
ISM's new orders index also plunged to a record low of 22.7 in December as prices sank to the lowest level since June 1949. A sub-50 reading indicates contraction.
Meanwhile, a trio of major banks finalized mergers on Thursday as the tumultuous financial sector continues to transform due to the credit crisis. Bank of America's (BAC) $19.4 billion purchase of Merrill Lynch (MER) completes BofA's surge to the top of the banking world and ends Merrill's 94 years of independence.
Wells Fargo (WFC), which is now the fourth-largest U.S. bank, also finalized its $12.7 billion acquisition of Wachovia (WB). In a smaller deal, PNC Financial (PNC) completed its $3.9 billion purchase of National City, the Cleveland lender that failed to maintain its independence during the credit crisis.
January Effect?
Wall Street could be benefiting from the so-called "January Effect," the market phenomena that occurs when stocks rise during the first month of the year as money reenters the markets to offset December declines. It's not clear if the slumping economy will hamper or prevent the "January Effect" in 2009.
"We know there is a ton of money on the sidelines. When you flip the calendar from one year to the next, you get a lot of new money that one way or the other needs to be committed," said Weisberg.
Crude Stays Hot
Mirroring the rally in the equities markets, crude oil futures overcame an earlier decline to end at the highest level in three weeks. The price of a barrel of crude closed at $46.34, up $1.74, or 3.9%. The commodity jumped by $8.63, or 22.89%, this week, halting a two-week losing streak.
Much like Wall Street, the energy market had a volatile and costly 2008. After surging to an all-time high of $145 per barrel in July, crude plummeted to as low as $35 due to demand destruction. By the time the dust settled, crude plunged 54.5%, the worst year in its Nymex traded history.
Corporate Movers
IndyMac, the failed California lender, was sold by the Federal Deposit Insurance Corporation for $13.9 billion to a consortium including Dune Capital, JC Flowers, Paulson & Co. and George Soros. The FDIC sees the takeover and sale costing $8.5 billion to $9.4 billion.
Starwood Hotels (HOT) jumped higher as the company’s announcement of a confidentiality agreement with Sam Zell’s investment group sparked speculation that the property magnate could take a greater stake in the hotel company.
Viacom (VIA), the media giant that owns MTV and Comedy Central, reached a last-minute preliminary deal with Time Warner Cable (TWC) on Thursday to avoid a costly blackout. The two sides, which had been feuding over programming fees, said they expect to finalize the agreement soon.
GMAC LLC, the lender rescued by the government earlier this week, gave up its exclusive agreement to provide financing incentive programs to General Motors(GM). In a regulatory filing, GMACalso said the government will receive 5 million preferred shares at 8% interest in exchange for its $5 billion capital infusion.
World Markets
European indexes soared higher, led by a 4.09% gain for France's CAC 40 and a 3.4% jump for Germany's DAX.
Asian markets ended sharply higher overnight as Hong Kong's Hang Seng soared 4.55%, outpacing more modest gains of 1.28% for Japan's Nikkei 225.
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