Bailout in the Balance, Stocks Close Higher

Stocks posted modest gains yesterday after a subdued day of trading as investors monitored the congressional debate over an auto industry bailout and shrugged off more poor economic data.

The Dow Jones industrial average spent most of the day fluctuating between slight gains and losses, closing up 0.8 percent, or 70.09 points, at 8761.42. The Standard & Poor's 500-stock index gained 1.2 percent, or 10.57 points, to close at 899.24, while the tech-heavy Nasdaq composite index was up 1.2 percent, or 18.14 points, to 1565.48.

Investors continued to clamor for the safety of government bonds as a hedge against market turbulence. After briefly trading in negative territory Tuesday, the yield on three-month government bills fell to 0.02 percent yesterday from 0.03 percent. That means that traders are willing to make little or nothing on their investment.

Industrial companies were among the day's best performers, having received a boost on expectations that they would benefit from an economic stimulus plan being pushed by President-elect Barack Obama. United States Steel climbed 7.6 percent to $37.64 a share, while aluminum maker Alcoa was up 6.8 percent to $10.20 a share.

The financial sector lagged the market after Citigroup and Bank of America gave American Express a sell rating. American Express fell 7.4 percent to $21.56 a share.

But market analysts said most of the day's focus was on Ford and General Motors. While White House and congressional Democrats have agreed on a bailout plan, many Republicans have resisted, raising doubts about the legislation's prospects.

GM fell 2.1 percent to $4.60 a share, while Ford was up 0.6 percent at $3.25 a share.

"That back and forth has created a lot of volatility today," said James A. Cox III, managing partner at Harris Financial Group in Richmond.

Meanwhile, the recession continued to impact corporate balance sheets. Office Depot climbed 9.1 percent to $2.65 a share after announcing it would shutter 112 stores. Eastman Kodak fell 8.5 percent to $6.59 a share after withdrawing its 2008 profit and sales forecast and announcing it would suspend its 401(k) match program.

Investors disregarded more bad economic news yesterday after a Commerce Department report showed that wholesalers reduced their inventories by 1.1 percent in October compared with the prior month.

That was a bigger drop than expected and may be further evidence of the country's deepening recession, analysts said.