Bulls Buck Dismal Data, Stocks Surge
Updated from 3:20 p.m. EST
After spending much of the day on the downside, U.S. stocks reversed course to finish with gains Friday, as investors pushed through an ugly employment report from the Labor Department and dismal housing data from the Mortgage Bankers Association.
The
Dow Jones Industrial Average
, down some 257 points earlier in the day, ended up 259.18 points, or 3.1%, to 8635.42, and the
S&P 500
added 30.85 points, or 3.7%, to 876.07. The
Nasdaq
climbed 63.75 points, or 4.4%, to 1509.31.
For the week, the Dow lost 2.2%, the S&P slipped 2.3%, and the Nasdaq edged down 1.7%.
Before turning higher, stocks had traded with losses following the release of several bearish economic releases. Before Friday's session commenced, the government reported that the
unemployment rate
reached a 15-year high of 6.7% in November, up from 6.5% in October but slightly below the 6.8% analysts had expected. Nonfarm payrolls showed a loss of 533,000 jobs, a much greater decline than the drop of 335,000 forecast by economists.
The September and October job-loss figures were also worse than previously thought. The September number was revised to 403,000 from 284,000, and October job losses were up to 320,000, up from an initial reading of 240,000.
The average workweek declined slightly to 33.5 hours, and hourly earnings were up 0.4%, compared with a 0.3% increase in October.
"This is almost indescribably terrible," wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics, in an email. He said that total job losses in the past six months have now reached 1.55 million, a figure that matches the entire recession of 2001.
On the other hand, Chris Johnson, CEO and chief investment strategist at Johnson Research, said that the market has already been pricing in a very weak unemployment number. "It's really hard to take the market by surprise." He said investors had largely already set themselves up for the dismal report, and he doesn't anticipate much more selling on this news.
Alan Gayle, senior investment strategist at RidgeWorth Financial, agreed. "Market expectations were not high ... regardless of what the official consensus was," he said. He pointed out that it's dangerous to compare today's 533,000 lost jobs with a similar absolute decline in the mid-1970s. Because the labor force has grown significantly in the past three decades today's reported losses are not as severe a shock, he said.
In a separate release, the
Federal Reserve
said that consumer borrowing declined by $3.6 billion to $2.58 trillion.
Traders were also training a keen eye on the automakers. CEOs from
General Motors
(GM) - Get Report
,
Ford
(F) - Get Report
and
Chrysler
were again appearing before lawmakers in hopes of striking a bailout deal. Sticking points on the package have included the source of funding, concessions the automakers should make and how much money they should get.
Separately,
GM
is reportedly planning to lay off an additional 2,000 workers at three factories as it continues to weather a brutal market.
The Wall Street Journal
also reported that Chrysler had retained Jones Day as counsel in preparation for a possible Chapter 11 bankruptcy filing.
GM shares fell 1.7% to $4.04, while Ford gained 2.3% to $2.72.
At this point, said Gayle of RidgeWorth, it appears that the government is prepared to support the auto industry. However, "We have no idea what form that stimulus will take." He said that the impact on the companies' stocks is very hard to determine. "I think a lot of the smart money that wants to play this has been moving into the bonds of the automakers," he said.
The
housing market
offered additional reasons for investor caution as Friday's session wore on. The Mortgage Bankers Association reported that the
mortgage delinquency
rate for loans on one-to-four-unit residencies rose 58 basis points sequentially in the third quarter to 6.99%. Year over year, the rate had increased 1.4%, the MBA said.
In other company news,
The Wall Street Journal
said airplane manufacturer
Boeing
(BA) - Get Report
may face additional delays for its 787 jet. Shares edged up 0.9% to $39.53.
Meanwhile,
Merrill Lynch
(MER)
shareholders voted Friday to approve a merger with
Bank of America
(BAC) - Get Report
. Merrill gained 9.5% to $13.04, and BofA rose 6.3% to $15.24.
Insurer
Hartford
(HIG) - Get Report
increased its 2008 earnings guidance to exceed Wall Street's consensus estimate. Shares more than doubled to $14.58.
As for
, Morgan Stanley cut its fourth-quarter earnings estimates for
Goldman Sachs
(GS) - Get Report
. Barclays also lowered its targets and estimates for chemical firm
DuPont
(DD) - Get Report
, chipmaker
Intel
(INTC) - Get Report
and pharmaceutical company
Merck
(MRK) - Get Report
.
Goldman rose 4.7% to $70.72, DuPont ticked up 1.8% to $24.12 and Merck jumped 6% to $26.49.
Shifting to commodities, crude oil shed $2.86 to close at $40.81 a barrel. Gold fell $13.30 to $752.20 an ounce.
Longer-dated U.S. Treasury securities were lower in price. The 10-year was losing 1-12/32 to yield 2.70%, and the 30-year was down 2-2/32, yielding 3.13%. The dollar was strengthening against its major foreign competitors.
Overseas, European exchanges such as the FTSE in London and the DAX in Frankfurt were trading lower. In Asia, Japan's Nikkei closed with losses, while Hong Kong's Hang Seng ended with gains.
