Updated from 3:22 p.m. EST

U.S. stocks held their rally into the finish Friday, as traders shrugged off the worst monthly unemployment reading in more than a decade and assessed troubling earnings statements from the automotive sector.

The

Dow Jones Industrial Average

ended up 248.02 points, or 2.9%, at 8943.81, and the

S&P 500

added 25.87 points, or 2.9%, to 930.75. The

Nasdaq

jumped 38.70 points, or 2.4%, to 1647.40.

For the week, however, the picture was not so rosy, after the Dow fell 9.7% over Wednesday and Thursday, logging its largest two-day decline since Oct. 27, 1987. Over the past five sessions, the Dow lost 4.1%, the S&P 500 gave back 3.9% and the Nasdaq edged down 4.3%.

Economic data releases continued to point to a dismal downturn. The Bureau of Labor Statistics reported that October nonfarm payrolls declined by 240,000, worse than analysts' projections of 200,000. The September job-loss figure was revised to 284,000 from 159,000. The

unemployment rate

came in at 6.5%, its highest reading since 1994 and above economists' estimates of 6.3%.

"We knew it was coming," said Neil Hennessy, fund manager at Hennessy Funds. "When your stock is down 50-60%, why not clean your company out? Clean everything off the books, simply because you might as well go into 2009 and 2010 lean.

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"Everything gets blown out of proportion for short-term consideration," said Hennessy. He said that U.S. employees are highly resilient. "They're not going to stay unemployed. ... If you take what we've already gone through, which is the auto, housing and finance -- those three sectors got absolutely annihilated -- and we're still here."

"The fourth quarter is shaping up to be one of the weakest in decades," wrote Chris Low, chief economist at FTN Financial, in an email. "The Fed will almost certainly cut rates to less than 1%, but there's not much more they can do there." He said the numbers bolster the argument for fiscal stimulus and that the Treasury may once again intervene in the financial system.

The Census Bureau's wholesale inventories report for September showed a decline of 0.1%, down from a 0.6% increase in August but below the consensus forecast of a 0.3% uptick. The National Association of Realtors' pending home sales index declined 4.6%, a heftier loss than the 3.4% anticipated by analysts.

President-elect Barack Obama held an afternoon news conference to discuss the state of the economy. He called for development of a fiscal stimulus plan, an extension of jobless benefits to the unemployed and additional help for the automakers, whose quarterly earnings statements showed an industry in disrepair.

Ford

(F) - Get Report

said Friday it lost $129 million for the third quarter and burned $7.7 million in cash and said it would cut additional jobs. Shares climbed 2% to $2.02.

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General Motors

(GM) - Get Report

shares stopped trading ahead of the company's earnings release. GM then announced a loss that was much heavier than anticipated and reported $6.9 billion in negative cash flow for the quarter. It warned that capital levels would fall short of levels necessary to sustain operations unless economic conditions improve substantially and said that it had set aside merger plans to focus on boosting its liquidity. GM shares dropped 9.2% to $4.36.

Paul Nolte, director of investments at Hinsdale Associates, said that GM's loss wasn't much of a surprise. With auto sales at current levels, he said, "We'll probably lose one of the big three within the next year. ... We could lose two."

Nolte said that GM isn't getting killed so much by its auto business as by its financing arm. "They've gotten well away from the basic business and they've been caught in an economy that's turned away from both sides."

"The biggest thing that pops out at you is the cash burn," said Art Hogan, chief market analyst at Jefferies. "I think we're really at the 11th hour here." He said GM may only have until next summer to reinvent itself and avoid bankruptcy.

Staying with autos,

Bloomberg

reported that GM, Ford and Chrysler are looking to get $50 billion in loans from the government to cover health care spending and general liquidity. Such aid would come on top of $25 billion loan passed by Congress in September.

Back in earnings news, entertainment giant

Disney

(DIS) - Get Report

reported decreased earnings, in part because of a charge related to debt owed by bankrupt brokerage

Lehman Brothers

. Fellow entertainment firm

Discovery Communications

(DISCA) - Get Report

beat Wall Street estimates on both the top and bottom lines, and offered in-line guidance for its fiscal 2008 revenue.

Disney added 2.4% to $22.36, and Discovery rocketed 17% to $14.09.

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Construction management firm

Fluor

(FLR) - Get Report

reported a large rise in third-quarter income. Shares climbed 21% to $41.03.

Meanwhile, communication equipment manufacturer

Qualcomm

(QCOM) - Get Report

announced falling profit and lowered its forward outlook. Shares nonetheless gained 7.9% to $35.66.

Telecom firm

Sprint Nextel

(S) - Get Report

swung to a third-quarter loss but announced it renegotiated terms of a credit facility and cut its debt levels. The stock dropped 8.4% to $3.37.

Beyond earnings,

Microsoft

(MSFT) - Get Report

CEO Steve Ballmer said that his company doesn't intend to work out a merger deal with

Yahoo!

(YHOO)

, according to a report by

Bloomberg

.

Microsoft shares edged up 3% to $21.50, and Yahoo! dropped 13% to $12.20.

Elsewhere on the merger front,

Panasonic

(PC)

and

Sanyo Electric

announced they were discussing a potential deal. Panasonic shares added 4.9% to $15.73.

Looking at the financials,

The Wall Street Journal

reported that troubled insurance giant

AIG

(AIG) - Get Report

was working with federal officials to potentially alter the terms of an $85 billion loan the government gave to AIG. Shares tacked on 13% to $2.11.

Separately,

Wells Fargo

(WFC) - Get Report

completed a share offering that fell short of some analysts' expectations. Shares ticked down 0.2% to $28.72.

In

analyst actions

, JPMorgan cut 2009 earnings estimates on

Goldman Sachs

(GS) - Get Report

and

Morgan Stanley

(MS) - Get Report

. The reduction in the Goldman estimates was tied to private-equity losses. Goldman lost 3.6% to $77.75, while Morgan Stanley rose 3.8% to $15.98.

In commodities, crude oil gained 27 cents to close at $61.04 a barrel. Gold added $2 to settle at $734.20 an ounce.

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Longer-dated U.S. Treasury securities were falling in price. The 10-year note was down 22/32, yielding 3.77%, and the 30-year was lower by 26/32 to yield 4.24%. The dollar was higher vs. the yen and pound, but softening against the euro.

Credit markets continued their loosening streak. Three-month dollar Libor dropped 10 basis points to 2.29%, a four-year low, indicating that interest-rate cuts from central banks around the world were having an impact. Overnight Libor remained level at 0.33%.

Abroad, European indices were gaining ground, as the FTSE in London and the Dax in Frankfurt traded higher. Asian exchanges were mixed, as Japan's Nikkei ended down and Hong Kong's Hang Seng closed with gains.