NEW YORK - US STOCKS recouped early losses and ended higher on Friday as traders looked past weak economic news and drew encouragement from a White House pledge to stave off the collapse of Detroit automakers.
The Dow Jones Industrial Average gained 64.59 points (0.75 per cent) to close at 8,629.68, shaking off early losses of some 200 points.
The Nasdaq composite rallied 32.84 points (2.64 per cent) to 1,540.72 and the broad Standard & Poor's 500 added 6.14 points (0.70 per cent) to 879.73.
The market opened weaker as last-ditch talks on the 14-billion-dollar (S$20.8 billion) package for the Big Three US automakers, backed by Democrats and the White House, broke down late on Thursday.
But stocks pared their losses and managed to move higher after the White House said it was considering tapping into a 700-billion-dollar financial rescue fund to keep the auto industry alive.
'The automakers' last hope is the White House,' said Mr Sean Maher at Economy.com, and pointed to some estimates of 2.5 million job losses if the auto sector collapses.
'Without government assistance, therefore, it is likely that the automakers will be forced to liquidate assets. This would be the absolute worst-case scenario for the nation, intensifying what we already expect will be the worst recession since the 1930s,' Mr Maher said.
The market also digested economic data highlighting a struggling economy.
US retail sales fell for the fifth straight month in November, dipping 1.8 per cent amid weak consumer sentiment and tight credit conditions in a deepening recession.
'There is clearly much more weakness ahead, as households haul spending plans back, due to worries about the future or simply because they don't have the funds,' said Ms Jennifer Lee at BMO Capital Markets.
A separate report showed US wholesale prices fell 2.2 per cent in November led by plunging energy prices, in the fourth straight month of decline.
The falling prices and weak spending raised concerns about a deep recession and deflation that will pressure the Federal Reserve to cut interest rates close to zero.
'The data for the fourth quarter consistently point to a large contraction in real GDP (gross domestic product) in the quarter, pointing to prices across the board continuing to face downward pressure going forward,' said Ms Dawn Desjardins at RBC Capital Markets.
'With recessionary conditions deepening and markets more worried about deflation than inflation, the Fed is expected to lower the funds rate again next week, adding more fire to the already very stimulative policy stance.'
The market also shook off news of fraud charges filed against prominent Wall Street broker Bernard Madoff in a massive 50-billion-dollar (S$74.51 billion) 'ponzi' scheme.
Mr Al Goldman, Wachovia Securities' chief market strategist, described Madoff's disgrace as a 'big bombshell'.
'At least half of his clients were hedge funds, banks and wealthy individuals. Probably a lot of leverage was involved. This will seriously hurt investors' confidence,' he said.
Among key stocks, General Motors skidded 4.37 per cent to 3.94 dollars and Ford rose 4.83 per cent to 3.04 dollars, coming off sharp opening losses.
Bank of America shook off weakness and edged up 0.13 per cent to 14.93 dollars after the largest US banking firm by assets announced plans to cut up to 35,000 jobs in the next three years due to weak conditions and its integration of brokerage firm Merrill Lynch.
Bonds firmed, extending the extraordinary run that has pushed yield to historic lows. The 10-year Treasury bond yielded 2.589 percent compared with 2.648 per cent on Thursday and that on the 30-year bond dipped to 3.064 per cent from 3.089 per cent. Bond yields and prices move in opposite directions. -- AFP
