Stocks Rise on Bargain Hunting

Stocks staged a rebound yesterday, despite dismal earnings from two Detroit automakers and a report showing the unemployment rate had reached its highest level in more than a decade.

Investors shrugged off the downbeat news -- though it was worse than most expectations -- amid a burst of bargain hunting. The Dow Jones industrial average had fallen almost 10 percent on Wednesday and Thursday, creating a buying opportunity that overshadowed the weak economic data.

"There is money out there, and if you know what you're doing, you're being presented with an opportunity to buy great companies at extremely good valuations," said Stephen Wood, senior portfolio strategist for Russell Investments.

The Dow was up 2.85 percent, or 248.02 points, to close at 8943.81, while the Standard & Poor's 500-stock index was up 2.88 percent, or 26.10 points, to close at 930.99. This year has now overtaken 2002 as the fifth-most volatile year on the S&P since 1926.

The tech-heavy Nasdaq composite index was up 2.41 percent, or 38.70 points, to close at 1647.40. All of the indexes were down about 4 percent for the week.

Some investors were also cheered by the prospect that the rising unemployment rate could prompt the Federal Reserve to cut interest rates again, analysts said. But yesterday's gains may be just a short break from the recent sell-offs. Some hedge funds continue to face pressure to meet client and lender demands for the return of their cash, forcing them to sell off shares, analysts said.

Investors looked past two doses of bad news: The Labor Department reported that employers slashed 240,000 jobs in October, more than the 200,000 forecast by analysts; and Ford and General Motors reported steep losses that renewed concerns about their prospects for survival.

GM is in the more precarious position and said it could run out of money next year. It was by far the biggest laggard on the Dow yesterday, its shares falling 9 percent to $4.36 a share. Ford was up 2 percent to $2.02 a share.

Analysts said that recent economic reports and corporate profits continue to fall below their already lowered expectations. "Everyone knows we're in a economic downturn, but the full magnitude is still not appreciated," said Marc Chandler, global head of currency strategy at Brown Brothers Harriman.

Crude oil prices were up less than 1 percent, to $61.04 a barrel. But after days of losses, the stability helped buoy energy stocks. Exxon Mobil gained 6.31 percent to $73.95 a share, while Chevron was up 4.78 percent to $73.46 a share.