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Stocks Open '09 With Rally

Elizabeth Trotta

Stocks on Wall Street started the new year on a positive note Friday, posting solid gains in the first trading session of 2009.

Though volume was on the light side, the Dow Jones Industrial Average added 258.30 points, or 2.9%, to 9035, and the S&P 500 gained 28.55 points, or 3.2%, to 931.80. The Nasdaq added 55.18 points, or 3.5%, to 1632.21.

Alcoa (AA Quote), up 7.6% at $12.11, and GM (GM Quote), which added 14% to $3.65, led the gainers on the Dow. All 30 stocks in the index rose.

Oil-service stocks were among the bright spots in New York trading, with Schlumberger (SLB Quote) adding 7.7% to $45.57 and Halliburton (HAL Quote) up 7% to $19.45. Baker Hughes (BHI Quote) advanced 7.1% to $34.33. The Philadelphia Stock Exchange Oil Service Sector index was up 7.6% at 130.57.

At the same time equities rallied, longer-dated U.S. Treasury securities were falling hard. The 10-year was down 1-26/32 to yield 2.40%, while the 30-year was sinking 3-19/32, yielding 2.81%.

"It was all equity market-movement related," says Mary Ann Hurley, vice president and bond market analyst at DA Davidson, of the selloff in the fixed-income arena. As soon as stocks posted gains, the longer-term Treasuries reacted, she says, despite the light volume. "We're definitely equity-market contained right now."

Investors closed 2008 with a small win on Wednesday, but also with historic losses for the year. In its worst year since 1931, the Dow gave up 33.8%, ending at 8776. The S&P fell 38.5% to 903, and the Nasdaq lost 40.5% to 1577.

Statistically, the first five trading days often provide clues to the trends for the year, says Quincy Krosby, chief investment strategist for Hartford. Still, as with any statistics, there are always outliers, she says. (In the first five days of trading in 2008, the Dow fell 672.75 points, or 5%.)

The market rose despite the fact that signs of the economic downturn continued to register around the globe. In the U.S., the Institute for Supply Management, a private trade group of purchasing executives, said that none of the manufacturing industries it surveys reported growth in December. Its national manufacturing index fell to 32.4% in December from 36.2% in November, the lowest reading since June 1980.

A reading above 50% indicates that the manufacturing economy is generally expanding, and below that, a contraction. If the index for December is annualized, it corresponds to a 2.7% decrease in real GDP annually, according to the report.

"It's bad," says Krosby. "It shows you how quickly the situation deteriorated, and it matches with some of the other data that indicates a decline came very quickly."

Not to put a silver lining on it, Krosby says, "but if you are able to instill confidence, if there's to be any upswing in terms of demand either through tax stimulus or spending programs enacted by the new administration, these numbers will start to shift."

In the U.K, the number of nonfood retailers who closed their doors rose 21.2% to more than 1,100 in 2008, according to a report by Experian. Britain is likely to see 1,400 more vendorsgo out of business in 2009, with an estimated one in 10 stores remaining empty, according to the report.

A last-minute surge in holiday shopping spurred by "massive unprecedented discounting," while a relief for store owners, wasn't enough, according to Jonathan de Mello, director of retail consultancy at Experian.

"Britain is still a nation of shopkeepers, and the retail sector is one of the U.K.'s largest employers," said de Mello. "It is not just people directly employed by retailers that will suffer from the fallout this Christmas, it is also their suppliers, manufacturers and service providers. We are all going to feel the effects as there is no doubt that the impact on retail will resonate through the entire economy."

In the U.S., the S&P Retail index gained 4.2% to 291. The ICSC-UBS weekly chain store sales snapshot and the Johnson Redbook retail sales index for the week ending tomorrow will offer more data on U.S. retailers early next week.

Meanwhile, exports from South Korea declined 17.4% to $27.29 billion in December, while imports dropped 21.5% to $26.62 billion, according to the government. Economists expected lesser declines for both imports and exports from Asia's fourth-largest economy, CNBC reported. The economy ministry expects a meager 1% growth in exports and a 4.7% decline in imports in 2009.

Economic hardships also continued to plague various domestic industries in the latter days of 2008. According to a report by the Semiconductor Industry Association, semiconductor sales plunged nearly 10% in November from a year prior, affected by a steep decline in revenue from memory chips.

Nonetheless, chipmaker Texas Instrument(TXN Quote) added 3.4% to $16.04, National Semiconductor(NSM Quote) climbed 7.5% to $10.82, and Intel(INTC Quote) traded up 3.7% to $15.20.

Corporate news domestically was on the light side. In its first order of business in the new year, Bank of America(BAC Quote) said Thursday it completed its purchase of Merrill Lynch, while Wells Fargo(WFC Quote) wrapped up its acquisition of Wachovia. Bank of America tacked on 1.8% to $14.33 and Wells Fargo added 1.8% to $30 on Friday.

Meanwhile, Time Warner Cable(TWC Quote) and Viacom(VIA Quote) resolved disagreements over fee hikes and reached an agreement early Thursday.

Time Warner garnered 3.6% to $22.22, while Viacom advanced 5.1% to $21.15. The companies had previously threatened to cut off 19 channels at midnight for roughly 15.7 million subscribers if they couldn't come to terms.

Elsewhere, auto-parts supplier Visteon (VC Quote) said it would lower costs by moving some workers to a four-day week and cutting their pay by 20%. Shares were unchanged at 35 cents.

GM and its financing arm GMAC said Friday that they have restructured their agreement to give GM more leeway as to how it structures and raises consumer loans. The move allows GM to use third-party lenders, creating access to cheap money for more incentives and satisfying GMAC's alteration into a bank holding company.

Earlier in the week, the Treasury Department gave the automaker the first $4 billion of a promised $13.4 billion in funding from the Troubled Asset Relief Program, and said it would inject $5 billion into GMAC in return for preferred shares and warrants.

In commodities, oil rose $1.74 to settle at $46.34 a barrel. Gold lost $4.70 to settle at $879.50. The dollar was stronger against the euro, pound and yen.