Wall Street Ends in Neutral

U.S. stocks close mixed as early investor enthusiasm for Bush's auto-bailout plan fades into triple-witching. Frank Curzio reviews the action in The Real Story (above).
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Updated from 4:12 p.m. EST

Stocks on Wall Street ended a choppy session Friday essentially where they left off the previous day, as morning enthusiasm for a $17.4 billion aid package for ailing Detroit automakers sputtered in a bewitched market.

The

Dow Jones Industrial Average

, which earlier rose more than 180 points, ended down 25.8 points, or 0.3%, at 8579.19. However, the

S&P 500

was edged up 2.32 points, or 0.3%, at 887.60, and the

Nasdaq

added 11.95 points, or 0.8%, to 1564.32.

For the week, the Dow ended down 0.6%, the S&P added 0.9%, and the Nasdaq gained 1.5%.

Aside from the Detroit bailout, the day's activity was under the spell of "quadruple witching." A quadruple-witching

hour

occurs in the last hour of trading on the third Friday of every March, June, September and December -- days on which stock index futures, stock market index options and stock options and single stock futures all expire.

The Real Story Wrap: December 19

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Leading headlines Friday, President Bush said the U.S. government will extend

$13.4 billion in loans to automakers

General Motors

(GM) - Get Report

and

Chrysler

in December and January through the Troubled Asset Relief Program (TARP), with another $4 billion available in February. The troubled companies have been charged with the task of showing financial viability by the end of March.

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"It's giving a psychological boost to the market, which is relieved that we're not facing another meltdown of economic decay," says Peter Cardillo, chief market economist for Avalon Partners.

President Bush allowed the automakers just enough lifeline to help them along until Obama takes over the White House next month, and the new administration will likely rearrange all of the stipulations in a more Detroit-and union-friendly manner, says Michael Pento, senior market strategist at Delta Global Advisors.

But that's not what Pento thinks should have happened. "They should have filed for Chapter 11 --we need a Detroit without unions or legacy costs," he says, arguing that the automaker pacifier is going to be a permanent line item unless they do serious restructuring.

White House Press Secretary Dana Perino said Thursday that an "orderly bankruptcy" was a possibility for the automakers. But, President Bush said Friday: "If we were to allow the free market to take its course now, it would lead to disorderly bankruptcy and liquidation for the automakers."

"It would have had devastating consequences for our economy and our workers," said President-elect Obama of letting the automakers fail at a press conference in which he introduced more members of his cabinet.

The president elect wouldn't comment about the changes he wants to make to the terms of the aid, but said, "I do want to emphasize that the American people's patience is running out, and

the automakers should seize on this opportunity over the next several weeks and months to come up with a plan that is sustainable -- and that means they're going to have to make some hard changes."

On the bright side for the car manufacturers, Obama noted that he wants some of the jobs that will be created as part of his massive stimulus plan to be in the auto industry.

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Shares of General Motors added 22.7% to $4.49, while

Ford

(F) - Get Report

, which has yet to receive aid, added 3.9% to $2.95.

Treasury Secretary Henry Paulson argued that Congress should now release the

second half of the $700 billion TARP fund

, which was set up in October to bail out struggling financial institutions. Paulson said the government's reservation of $17.5 billion of said funds for the automakers signals the allocation of the first $350 billion.

"TARP has many manifestations now it's being used to bail out Detroit," says a skeptical Pento, noting that it's going to be hard for Paulson to seriously ask Congress for more money. "If he had a set plan, he should have stuck to it," he says.

The White House reportedly said that it won't necessarily ask Congress to release the second $350 billion, implying that the matter might fall to the new administration.

Next week, which will be an abbreviated trading week due to the Christmas holiday, will bare a variety of economic data, including the final third-quarter GDP, University of Michigan consumer sentiment index and the

Washington Post

and

ABC News

consumer comfort index, new-home and existing-home sales and mortgage applications data, personal income data and initial jobless claims, retail sales and durable goods data.

"There's a lot of important economic news coming out next week and the housing data will be in the spotlight," says Avalon's Cardillo.

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Retail stock

Target

(TRGT)

gave up 3% to $34.39, while

Sears

(SHLD)

gave up 0.4 to $39.22, ahead of the last shopping weekend before the Christmas holiday as snowstorms descended across the country threatening to discourage shoppers from heading to the malls.

Wal-Mart

(WMT) - Get Report

, however, added 50 cents to $55.91.

In other corporate news on Friday,

Panasonic

(PC)

said it will acquire competing Japanese electronics maker

Sanyo

for up to $9 billion through a public tender offer. Shares rose 2.6% to $11.60.

Research In Motion

(RIMM)

gave a fourth quarter outlook ahead of Wall Street expectations after Thursday's close. Nevertheless, Cowen

downgraded

the stock to underperform.

Meanwhile,

Oracle

(ORCL) - Get Report

said its second-quarter revenue came in below analysts' estimates, but executives reassured investors. RIM rose 11.4% to $42.8 and shares of Oracle added 7% to $17.78 on Friday.

Debt rating agency Standard & Poor's lowered its rating for 11 financial institutions including

Goldman Sachs

(GS) - Get Report

,

Deutsche Bank

(DB) - Get Report

,

JPMorgan Chase

(JPM) - Get Report

and

Morgan Stanley

(MS) - Get Report

.

Goldman ticked up 0.9% to $80.73; Deutsche Bank added 1.4% to $36.52; JPMorgan edged up 0.4% to $30.32; and Morgan Stanley fell 4.8% to $15.45.

Moving to commodities, crude oil fell $2.35 cents to settle at $33.87 a barrel. Gold gave up $1 to settle at $838.70 an ounce.

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Longer-dated U.S. Treasury securities were falling in price. The 10-year was down13/32 to yield 2.1% and the 30-year was falling 28/32, yielding 2.6%. The dollar was stronger against the euro, pound, and yen.

Overseas, the FTSE in London and the DAX in Frankfurt were down 1% and 1.3%, respectively. In Asia, Japan's Nikkei and Hong Kong's Hang Seng ended lower.

Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. AP contributed to this report.