Stocks Hold to Gains

Wall Street continues to trade with gains as investors are heartened by President-elect Obama's talk of infrastructure spending and the White House's hints for an auto bailout.
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Updated from 1:08 p.m. EST

Stocks in New York continued to rally Monday afternoon as investors lauded a massive infrastructure stimulus plan President-elect Obama outlined over the weekend and as White House officials said a deal with Congress to rescue U.S. automakers is imminent.

The

Dow Jones Industrial Average

was gaining 349 points at 8984, and the

S&P 500

was adding 37 points at 913. The

Nasdaq

was up 67 points at 1577.

The president-elect spurred investor enthusiasm with his intention to launch the single largest new investment in the

nation's infrastructure

since the creation of the federal highway system in the 1950s. The plan could create as many as 2.5 million new jobs by 2011, according to the upcoming administration.

But, the idea that this alone heals the economy is a huge question mark, says Chip Hanlon, founder and president, Delta Global Advisors. "Ultimately in the short term, you're either borrowing or using current tax payer dollars to put other tax payers back to work. It's sort of a reallocation of capital and that doesn't necessarily grow an economy," he says.

Today's rally in the market continues the trend established late Friday, when the major indices reversed course to finish in positive territory. "It might be that the 40% decline over the past year has already factored in much of the bad news already," wrote Paul Nolte, director of investments at Hinsdale Associates. "As we have been discussing over the past two months, the economic data will be bad for at least the next couple of months as the credit collapse works its way through the economy."

Hanlon says investors are willing to trade more aggressively into the market because it's been oversold -- moreover, they like how it's traded in the face of bad economic news. As to whether this indicates that the downside is priced in, he says maybe, maybe not. "We've seen a lot of bear market rallies over the past year, and I would guess that this is another," he said, and investors are inclined to buy dips and catch rallies in this environment.

Friday's

dismal November jobs data

may have upped the ante for pending economic stimulus plans. On Monday, White House press secretary Dana Perino told reporters that a plan to aid the nation's

Big Three automakers

--

Ford

(F) - Get Report

,

General Motors

(GM) - Get Report

and

Chrysler

-- could happen as early as today. Under the plan, the government would draw emergency aid from an existing loan program meant to help the automakers build fuel-efficient vehicles.

"The dreadful U.S. jobs report for November reinforced Obama's mandate to act decisively, and all indications are that he will," Tony Crescenzi, chief bond market strategist for Miller Tabak, wrote on his

RealMoney.com blog

. "The employment news will also empower the

Federal Reserve

to move further into the realm of quantitative easing and to provide credit where it has become difficult to obtain, including in the mortgage and consumer loan areas, for example."

Goldman Sachs

on Monday issued an analyst report saying that banks are "only halfway through a three-year credit cycle."

News of more layoffs in the financial firms continued into the new week. Swiss newspapers reported that

UBS

(UBS) - Get Report

may cut as many as 4,500 jobs. Last week, another Swiss bank,

Credit Suisse

(CS) - Get Report

, said it plans reduce its headcount by 5,300, primarily in investment banking.

Also making cuts, Dow component

3M

(MMM) - Get Report

said Monday that it will cut 1,800 jobs next year -- in addition to 1,000 job cuts announced in the third quarter-- and reduced 2008 guidance. 3M also said that 2009 earnings would be well below consensus targets.

Meanwhile, one of the largest chemical makers in the world,

Dow Chemical

(DOW) - Get Report

, said it will cut 5,000 jobs and close 20 plants in an effort to save about $700 million annually by 2010. Chairman and Chief Executive Andrew Liveris said the company will not suspend or reduce its dividend, however.

Beer merger

Anheuser Busch-InBev

(BUD) - Get Report

also added to the scores of headcount cuts on Monday, saying it will layoff 1,400 employees, or 6% of its U.S. workforce.

The media sector also isn't catching any breaks -- conglomerate

Tribune Co.

, owner of the

Chicago Tribune

, the

Los Angeles Times

, the Chicago Cubs and other properties, filed for bankruptcy protection on Monday. The company, which was last year taken private by real estate titan Sam Zell, filed for protection as it struggles to support $13 billion in debt.

The Chicago-based company faces headwinds, including declining revenue, a tough economy and a credit crisis, which have created what Zell called "the perfect storm" in a memo to employees.

On a bright note, some lower-priced fast-food chains may be rising in appeal as the economic concerns worsen,

McDonalds

(MCD) - Get Report

announced that same-store sales rose 7.7% in November.

Shifting to commodities, crude oil rose $2.90 to settle at $43.71 a barrel. Gold rose $17 to settle at $769.30 an ounce.

Longer-dated U.S. Treasury securities were edging lower in price. The 10-year was recently down 8/32 to yield 2.73%, and the 30-year was off by 4/32 to yield 3.13%. The dollar was weaker against the euro and pound, and higher versus the yen.

Overseas, European exchanges such as the FTSE in London and the DAX in Frankfurt were trading significantly higher -- up 6.2% and 7.6%, respectively. In Asia, Japan's Nikkei ended higher, while Hong Kong's Hang Seng also ended with gains.