By Heather Landy
Special to The Washington Post
Saturday, January 3, 2009
NEW YORK, Jan. 2 -- Trading was thin and the economic backdrop was murky, but stocks surged Friday, pushing the Dow Jones industrial average back above 9000 to its highest closing level in two months and offering comfort to traders after a harrowing 2008.
"It feels good to get off to a good start on the first trading day of the year," said Fred Dickson, chief market strategist at the investment firm D.A. Davidson. "Even though all the economic data is discouraging, I think there's a psychological lift to starting off the year on solid footing."
Investors, sensing an opportunity to scoop up stocks at what might prove to be bargain prices, shrugged off data from the Institute for Supply Management showing that manufacturing activity contracted in December to a 28-year low.
General Motors, Alcoa, Boeing and Citigroup led the rise among the 30 blue-chip stocks of the Dow, which gained 2.9 percent, or 258.30 points, to close at 9034.69. Only one component, J.P. Morgan Chase, finished lower, down 18 cents to $31.35.
The Standard & Poor's 500-stock index advanced 3.2 percent, or 28.55 points, to 931.80, while the technology-heavy Nasdaq composite index climbed 3.5 percent, or 55.18 points, to 1632.21.
The Dow has now risen for three consecutive trading sessions. But the market still has a long way to go to recover from a year that handed the Dow a 34 percent decline, its biggest drop since 1931, and left the S&P down 38 percent for its worst performance since 1937. The Nasdaq was down more than 41 percent for the year.
"We still think the market bottomed on Nov. 20, and 2009 will show a continuation of the 25 percent rally we've seen the past six weeks," said Phil Orlando, chief equity strategist with Federated Investors. "The economy will start to improve by mid-2009, and stocks are starting to discount that now."
General Motors surged 14 percent, to $3.65, after the company's finance arm, GMAC, made concessions that will allow the automaker to offer car buyers financing incentives from competing lenders.
Citigroup rose 6.4 percent, to $7.14. The bank, which got a $45 billion bailout from the federal government last year, acknowledged just before the New Year's Day holiday that it would pay no bonuses to its chairman and its chief executive, and smaller bonuses than last year to other senior managers.
Dynegy was among the top gainers in the S&P, climbing 19 percent, to $2.38, after the Houston-based energy company dissolved a venture to expand its power plants and build new generators.
Oil producers also rose as continued Israeli attacks on Hamas in the Gaza Strip raised concerns about the potential for supply disruptions in the Middle East, driving up the price of crude oil by 3.9 percent to $46.34 a barrel. Exxon Mobil shares rose nearly 2.3 percent, or $1.81, to $81.64. Chevron jumped 3.4 percent, or $2.55, to $76.52.
About five stocks rose for every one that declined on the New York Stock Exchange. Advancers outpaced decliners by a ratio of about 3-to-1 on the Nasdaq.
Overall, the number of shares that traded hands in the post-New Year's holiday session was about 30 percent below normal, but volume is expected to pick up next week as more traders get back to work. And next Friday's unemployment report will be a key yardstick for investors in trying to gauge the depth of the recession, Dickson said.
Friday's gains in the U.S. market followed advances in Japan's Nikkei, Germany's DAX and the United Kingdom's FTSE 100. Governments across Asia have signaled that they will use fiscal and monetary stimulus to help soften the blow of eroding demand for exports to the United States and Europe.