Updated from 2:04 p.m. EST
Following a heavy selloff in the previous day's session, stocks in the U.S. were staging a rebound Tuesday, as
narrowed its earnings forecast and the Big Three automakers returned to Capitol Hill hoping to secure a bailout.
The major indices had lately eased off their session highs but continued to trade with gains. The
Dow Jones Industrial Average
was gaining 79 points to 8228, and the
was better by 12 points to 828. The
added 22 points to 1420.
During the previous outing, stocks sold off sharply as traders took profits from a sharp five-day rally in the blue-chip indices. The National Bureau of Economic Research also said that the economy has been in a recession since December 2007. At Monday's close, the Dow had lost 7.7% of its value, while the S&P 500 and Nasdaq each tumbled about 9%.
Paul Nolte, director of investments at Hinsdale Associates, said that today's rebound is not surprising given the broad selloff from the previous session. Trading in the S&P 500 has been tied to a 20% range since October as the economy attempts to determine how much longer the U.S. recession will continue, he said.
"The news is going to be bad for the next three or four months," said Nolte, who foresees unemployment, retail sales and home sales numbers continuing to worsen in the short term. "Welcome to the worst part, probably, of the current downturn."
The market is currently wrangling with a push and pull between deflation and inflation, said Michael Pento, senior market strategist at Delta Global advisors. The Treasury and
continue to pump money into the market, but the move is ultimately inflationary, he said.
The effect, said Pento, will be debt forgiveness for the consumer at the expense of the Fed's and Treasury's balance sheets. Such actions will hamper the government's ability to act to control inflation later, and the next time the economy faces crisis, there will just be more leverage to unwind, he said.
The alternative is to endure a severe downturn recession to bring home prices and consumer debt to historical norms, Pento said. "A massive deleveraging has to occur -- not only on the consumer level, but on the government level," he said.
In a continuation of its efforts to provide liquidity to the financial system during the credit crisis, the Federal Reserve extended until April 30 the Primary Dealer Credit Facility, the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility and the Term Securities Lending Facility.
Ahead Monday's trading, industrial titan
narrowed its fourth-quarter earnings-per-share projection to between 50 cents and 52 cents from a previous target of 50 cents to 65 cents. The company also affirmed its intention to maintain its $1.24 per share dividend in 2009.
Investors were also closely watching
. Chief executives from the automakers were submitting detailed plans to Congress in an effort to show their businesses still warrant a federal bailout.
Ford requested from Congress $9 billion in low-interest financing as a backstop while it reorganizes operations and said it hopes to break even or turn a profit in 2011. The company said it would rather transform its business without government help.
"My personal preference would be to force a merger between all or two of them," Hinsdale's Nolte said of the automakers. "They're going to have to get smaller. They're not selling that many cars anymore." Nolte said that the $25 billion bailout the automakers are after is not an adequate solution. Worries that consumers would cease buying cars from a bankrupt company are overstated, he said. He added that it would be acceptable for the government to stand behind the warranties on the automakers' products in the event of a bankruptcy.
While the automakers petition the government, the
United Auto Workers
union is reportedly planning an emergency meeting to discuss ways to help their employers secure emergency funds.
Automakers also rolled out their November sales figures Tuesday. Ford said its light-vehicle sales fell 31% year over year, slightly better than expected.
reported a sales decline of 34%, and
said its November sales dropped 32%.
GM posted the worst decline, with vehicle sales down 41%.
Elsewhere, a union of engineers for aerospace firm
ratified new contracts with the company. The deal covers more than 20,000 workers. Earlier this year, Boeing faced production delays and reduced earnings when its machinists union elected to strike.
announced systemwide capacity cuts of 6% to 8% and said it was assessing the reductions' impact on its employees.
An executive from American Airlines parent
reportedly said the company raised $200 million in the fourth quarter by selling some of its fleet to leasing companies and then renting.
Among financial companies,
The Wall Street Journal
would post a $2 billion loss for the most recent quarter.
Several big technology names were also making headlines.
The Wall Street Journal
reported that ex-AOL CEO Jonathan Miller is trying to gather money to buy part or all of
announced plans to collaborate on development of solid-state drives for servers.
reduced its fourth-quarter revenue forecast, citing a weakening global economy and slackening demand.
In earnings news,
posted a fourth-quarter loss that tripled from a year ago. Similarly, department-store operator
announced a wider-than-expected third-quarter loss and announced an additional $500 million in planned share repurchases.
said its third-quarter earnings declined 43% on restructuring charges.
In the commodities arena, crude oil lost $2.32 to settle at $46.96 a barrel. Gold gained $6.50 to close at $783.30 an ounce.
Longer-dated U.S. Treasury securities were rising in price. The 10-year was up 12/32 to yield 2.69%, and the 30-year was higher by 12/32, yielding 3.20%. The dollar was rising vs. the pound but falling against the euro and yen.
Overseas, European markets, such as the FTSE in London and the DAX in Frankfurt, were marking gains. In Asia, both Japan's Nikkei and Hong Kong's Hang Seng finished with losses.