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Business

Wall Street closes up on hopes of White House auto rescue

Latest update : 2008-12-12

Despite a turbulent day on world markets due to uncertainty over the future of the US auto industry, Wall Street closed higher as the White House vowed to come to Detroit's rescue following the Senate's rejection of a bailout plan.

AFP - Global stock markets came under heavy pressure Friday as fears mounted of a collapse of the Big Three US automakers but Wall Street rebounded after the White House vowed to come to Detroit's rescue.
   
The Dow Jones Industrial Average gained 0.75 percent to close at 8,629.68, shaking off early losses.
   
The Nasdaq composite rallied 2.64 percent to 1,540.72 and the broad Standard & Poor's 500 added 0.70 percent to 879.73.
   
"Wall Street survived an unnerving start and finished on an upbeat note today, as confidence grew that the government will not let automakers fail," said Al Goldman at Wachovia Securities.
   
The market opened weaker as last-ditch talks on the 14-billion-dollar package for the Big Three US automakers, backed by Democrats and the White House, broke down late 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 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," Maher said.
   
The market also digested economic data showing a sputtering economy.
   
US retail sales fell for the fifth straight month in November, dipping 1.8 percent amid weak consumer sentiment and tight credit conditions in a deepening recession.
   
A separate report showed US wholesale prices fell 2.2 percent 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 dollar in turn fell sharply, hitting a 13-year low against the yen.
   
European stock markets were down despite the European Union's announcement of a 200-billion-euro (260 billion dollar) economic stimulus plan aimed at digging the bloc out of recession.
   
London's FTSE-100 closed down 2.47 percent, in Paris the CAC 40 was down 2.80 percent and the Frankfurt Dax lost 2.18 percent.
   
In other markets, Brazil's Bovespa advanced 2.22 percent and Canada's S&P/TSX added 1.22 percent.
   
Tokyo's Nikkei index slumped by more than seven percent at one point as the dollar tumbled below the key 90-yen level for the first time since 1995.
   
The Japanese benchmark ended down 5.6 percent as exporters reeled from the stronger yen, which undercuts their overseas earnings.
   
Hong Kong shares closed down 5.48 percent, Seoul dived 4.38 percent and Sydney was off 2.4 percent.

Date created : 2008-12-12

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