ECONOMICS US stocks rally after two-day rout, shrug off bad news November 8, 2008 AAP
US stocks rallied today after two days of steep losses on recession fears, despite grim data showing October unemployment spiked to a 14-year high and hefty quarterly loss from General Motors and Ford.
The Dow Jones Industrial Average leapt 248.02 points (2.85 per cent) to finish at 8,943.81 and the tech-heavy Nasdaq rose 38.70 points (2.41 per cent) to 1,647.40.
The broad Standard & Poor's 500 index gained 25.87 points (2.86 per cent) to 930.75.
The positive action came after two days of heavy sell-offs as global markets plunged on fears of a deep worldwide recession.
The Dow had lost more than 10 per cent in the past two days, the sharpest fall since October 1987, as global markets reeled from the credit crisis and recession fears.
The blue-chip Dow regained about half of yesterday's losses as investors digested new signs of the depth of the US economic downturn.
"Stocks are looking past the dismal nonfarm payroll number and the highest unemployment rate since 1994 and are solidly higher, suggesting that recessionary conditions are somewhat discounted by the Street," analysts at Charles Schwab & Co wrote in a client note.
The world's largest economy shed 240,000 jobs in October, more than market expectations, and the unemployment rate shot up to a 14-year high of 6.5 per cent, the Labour Department reported.
It was the 10th straight month of job losses amid the credit squeeze and downturn.
The department also revised sharply higher the job loss figures for August and September.
"We are facing the greatest economic challenge of our lifetime. We will have to act swiftly to resolve it," president-elect Barack Obama said at his first news conference since his election victory Tuesday.
"Immediately after I become president, I will confront this economic crisis head-on," he vowed.
Obama, who takes office in January, is facing rising signs of a deep recession in the US and a global credit squeeze that is punishing economies worldwide.
Peter Morici, an economist at the University of Maryland, said the jobs data was much worse than expected "and represents wholesale capitulation".
"The challenges facing president-elect Barack Obama could not be clearer. He must reverse the haemorrhaging of high-quality jobs and declining real wages, and set the course to restore high-quality growth," Morici said.
Among key stocks in focus, General Motors plunged 9.17 per cent to $US4.36. The biggest US automaker reported a third-quarter loss, warned it would run out of cash in the first half of next year and appealed for a US government rescue.
Rival Ford skidded 2.02 per cent to $US2.02. The embattled number-two US automaker reported a third-quarter loss that was lower than a year ago, but excluding special items the loss far exceeded market expectations.
The company said it would cut a further 10 per cent of its salaried employee costs.
Walt Disney advanced 2.41 per cent to $US23.36 after posting disappointing earnings and a drop in attendance at its theme parks.
Toymaker Mattel rose 2.55 per cent to $US14.89 after saying it was slashing 1,000 jobs, or 3.0 per cent of its workforce, amid the economic downturn.
Microsoft shares advanced 2.97 per cent to 21.50 after chief executive Steve Ballmer ruled out making another bid for internet firm Yahoo, The Wall Street Journal reported. Yahoo dived 12.61 per cent to $US12.20.
Bonds fell. The yield on the 10-year US Treasury bond rose to 3.780 per cent from 3.707 per cent yesterday and that on the 30-year bond increased to 4.261 per cent from 4.200 per cent. Bond yields and prices move in opposite directions.
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