Dow up 299 on 'Obama bounce,' automaker hopes

By Charley Blaine and Elizabeth Strott

Stocks surged to their highest levels in four weeks today as Wall Street bet that President-elect Obama's plan to invest in schools, roads and new forms of energy will mean big things for steel, construction, engineering and construction-equipment stocks.

At the same time, shares of General Motors (GM, news, msgs) and Ford Motor (F, news, msgs) both shot higher on hopes that Congress will pass a short-term financing package for the U.S. automakers.

But weak guidance from FedEx (FDX, news, msgs) and Texas Instruments (TXN, news, msgs) may pressure markets on Tuesday.

The Dow Jones industrials jumped 299 points, or 3.5%, to 8,934, its highest close since Nov. 7. The Standard & Poor's 500 Index closed up 3.8% to 910, its first close above 900 since Nov. 13. The Nasdaq Composite Index was up 62 points, or 4.1%, to 1,572, its best close since Nov. 13.

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The major averages saw their ninth gain in the last 11 sessions. Since Nov. 20, the Dow is up 18.3%, with the S&P 500 up 20.9%, and the Nasdaq up 19.4%. And it was a very broad rally; of 42 indexes that Market Dispatches tracks, 41 were higher.

The rally is a continuation of the "Obama bounce" that began on Nov. 21, when news broke that Tim Geithner would be nominated as the new Treasury secretary.

Today's leg of the rally saw Apple (AAPL, news, msgs) briefly top $100 for the first time since Nov. 10. Apple, which hasn't finished above $100 since Nov. 5, was up 6.1% to $99.72. Google (GOOG, news, msgs) was up 6.4% to $302.11, its first close above $300 since Nov. 17.

GM, up 20.8% to $4.93, was the top performer among the 30 Dow stocks after Rep. Barney Frank, D-Mass., said that Congress and President Bush are negotiating a $15 billion measure to rescue domestic automakers without forcing the ouster of their chief executives.

While Frank told CNBC that the measure will be approved by Congress and signed into law this week, there were indications that the Bush administration may be balking at the measure.

Ford was up 24.3% to $3.38.

The prospects of a huge stimulus program next year helped push aluminum giant Alcoa (AA, news, msgs) up 17.6%, to $9.58. U.S. Steel (X, news, msgs) was up 24.4% to $35.79. Freeport-McMoRan Copper & Gold (FCX, news, msgs) was up 19.1% to $20.01.

Construction engineering company Jacobs Engineering (JEC, news, msgs) was up 15.2% to $48.87. Caterpillar (CAT, news, msgs) jumped 10.9% to $42.42, and rival Joy Global (JOYG, news, msgs) was up 16% to $21.69.

Obama said Saturday in his radio address that he plans to develop millions of jobs by "making the single largest new investment in our national infrastructure since the creation of the federal highway system in the 1950s."

Conference Board senior economist Gad Levanon believes job losses in the U.S. could reach 3 million by the middle of 2009. The group's employment trends index fell 1.6% in November and is down 13% over the past year.

The economy has shed 1.9 million jobs so far this year.

Asian stocks rallied in the overnight session. Hong Kong's Hang Seng Index was up 8.7% and the MSCI Asia-Pacific Index added 4.4%.

Twenty-four of the 30 Dow stocks were higher today, with five -- GM, Alcoa, Bank of America (BAC, news, msgs), American Express (AXP, news, msgs) and Caterpillar -- all showing gains of 10% or more. In addition, 416 S&P 500 stocks were higher, along with 83 stocks in the Nasdaq-100 Index ($NDX.X). The index was up 47 points, or 4% to 1,225.

In Europe, stocks also made gains. London's FTSE 100 Index ($GB:UKX) was up 6.2%, and the DJ Stoxx 600 Index jumped 6.5%. Germany's Xetra Dax Index ($DE:DAX) was up 7.6%.

More talk of a market bottom

Coupled with Friday's rally, today's gains have already generated chatter that the market has reached a bottom.

From Friday's intraday low to today's close, the S&P 500 jumped 11.1%. And so far in December, the Dow, S&P 500 and the Nasdaq Composite Index are all showing small gains.

Stock Charts (Year)

Standard & Poor's 500 Index

The gains could disappear quickly, if only many traders will be tempted to take profits. Futures trading late today suggests that U.S. stocks may open lower.

Nonetheless, Laszlo Birinyi, the investor who accurately predicted this year’s rout in financial shares, told Bloomberg TV today that the S&P 500 reached a bear market bottom two weeks ago. He recommended buying the largest U.S. stocks.

"The common knowledge among investors that things are bad and will only get worse is precisely what forms the basis of every durable market bottom," wrote John Hussman of the Hussman Funds' in a piece published on the Seeking Alpha market blog.

Miller Tabak's Tony Crescenzi called the rally the "Obama bounce" because it has coincided with the rapid-fire announcements of Cabinet secretaries in the incoming Obama administration.

"The tone that Obama set will likely continue to benefit the financial markets for weeks to come, although there will be plenty of obstacles along the way."

But there's lots of skepticism about the idea of a market bottom. Earlier pronouncements this year that the market had found a bottom have proved wrong.

Stock Charts (Year)

FedEx

Texas Instruments

Bob Doll, global chief investment officer for equities at BlackRock, is more bearish, Financial Week noted.

Doll told Reuters that while he believes stocks may indeed have bottomed at the end of November, they’re more likely to trade sideways for several months as the economy continues to slow. And financial stocks may take years to find stability again, he said.

Weak economy hits FedEx, Texas Instruments

FedEx said late today it expects to report a better-than-expected second-quarter profit, but slashed its fiscal 2009 outlook as a weakening U.S. economy offsets lower fuel prices, sending its shares down more than 11% to $66.19 in after-market trading. FedEx had been up 1% to $74.48.

The package delivery company's earnings warning came minutes after trucking and logistics company Con-way (CNW, news, msgs) cut its full-year 2008 earnings outlook; its shares fell 4.4% to $24.64.

TI shares fell 3.6% to $14.28 after the company cut its earnings and revenue outlook for the fourth quarter. TI cuts its guidance after its biggest customer Nokia (NOK, news, msgs) had issued two warnings about cell phone demand in three weeks.

TI now expects to earn 10 cents to 16 cent, from an Oct. projection of of 30 cents to 36 cents. Fourth-quarter revenue will be $2.3 billion to $2.5 billion, down from its earlier target of $2.83 billion to $3.07 billion. Analysts had expected $2.89 billion.
The company has suspended all hiring and will temporarily idle many plants.

Also cutting guidance today: chip makers National Semiconductor (NSM, news, msgs) and Altera (ALTR, news, msgs). National Semi shares fell 6% after hours to $9.64. Altera was off slightly after hours to $13.96.

Energy prices -- New York close

	Mon.	Fri.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$43.71	$40.81	$2.90	-19.71%	-54.46%
Heating oil (per gallon)	$1.4904	$1.4265	$0.0639	-10.95%	-43.75%
Natural gas (per million BTU)	$5.5660	$5.7420	-$0.1760	-14.50%	-25.62%
Unleaded gasoline (per gallon)	$0.9618	$0.9012	$0.0606	-16.09%	-61.39%

Crude rises as OPEC talks production cuts

Crude oil closed up $2.90 to $43.71 today. Friday's close of $40.81 was a four-year low.

The Organization of Petroleum Exporting Countries' president, Chakib Khelil, told The Associated Press that the cartel will likely cut oil production at its next meeting on Dec. 17 and that a cut would be "severe."

Meanwhile, the average price of regular gasoline fell 22 cents a gallon over the past two weeks to $1.75, according to the Lundberg survey, the lowest level in nearly five years.

The cheapest gas was in Cheyenne, Wyo., at $1.46 a gallon; the most expensive place to fill up was in Anchorage, Alaska, where gas costs $2.54 a gallon.

Job cuts at 3M, Dow Chemical, UBS

Dow component 3M (MMM, news, msgs) said today it is cutting about 1,800 jobs in the fourth quarter, on top of 1,000 job cuts that the company announced in the third quarter.

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The company also lowered its 2008 earnings forecast to between $5.10 per share and $5.15 per share, lower than previous guidance of between $5.40 per share and $5.48 per share.

Stock Charts (Year)

3M

3M also said it will defer merit-based pay raises because of the weak economic environment.

Shares were down 4.1% to $57.38. The loss was the biggest among the Dow stocks.

3M wasn't the only company announcing big job cuts today. Dow Chemical (DOW, news, msgs) said it will eliminate 5,000 full-time jobs and will close 20 facilities in high-cost locations; it also will temporarily idle about 180 plants.

The moves are part of the company's restructuring plans, but Dow is accelerating the implementation of the plans "as the current world economy has deteriorated sharply," the company said in a statement.

Shares rose 7.2% to $20.37 in midday trading.

Meanwhile, Swiss financial-services company UBS (UBS, news, msgs) may cut up to 4,500 additional jobs, according to Swiss newspaper SonntagsZeitung.

The newspaper did not specify where the cuts would take place but said they could be announced in the next few weeks.

"There are no such decisions," UBS spokeswoman Tatiana Togni said to Bloomberg News Sunday. "We do not comment on speculations regarding further head count reductions."

UBS has announced 9,000 job cuts over the past year amid the financial turmoil.

The stock was up 9% to $13.63.

Deal to save automakers appears closer

General Motors and privately held Chrysler would be able to survive at least until March, according to an agreement in principle by congressional Democrats and the Bush administration.

The deal would provide $15 billion in short-term financing to the automakers to help them make it through the beginning of next year, The Wall Street Journal reported Sunday, but the White House and Congress are hitting a roadblock over the role of an "auto czar" to oversee the restructuring.