U.S. stocks closed sharply higher Monday as President-elect Barack Obama's weekend announcement of the largest U.S. economic stimulus plan in 50 years. The plan, centered around a major planned infrastructure investment, led investors to buy a range of issues, from machinery makers to materials producers. Monday's stock market rally extended steep gains from Friday.
Also Monday, General Motors (GM) and Ford Motor Co. (F) rallied on media reports that Detroit automakers; were nearing a deal to obtain about $15 billion in federal aid.
Bonds were lower, as was the dollar index. Gold futures surged on news of the proposed Obama stimulus plan. Oil futures were sharply higher.
On Monday, the Dow Jones industrial average finished higher by 298.76 points, or 3.46%, at 8,934.18. The broad S&P 500 index rose 33.63 points, or 3.84%, to 909.70. The tech-heavy Nasdaq composite index gained 62.43 points, or 4.14%, to 1,571.74.
On the New York Stock Exchange, 25 stocks were higher in price for every seven that declined. The ratio on the Nasdaq was 20-8 positive. Trading was moderate. Traders were squaring positions week's Quadruple Witching expiration of futures and options, reports S&P MarketScope.
European equities rallied, with major indexes climbing 6.19% in London, 7.63% in Frankfurt, and 8.68% in Paris. Asian markets finished solidly higher, with Tokyo stocks rising 5.20%, Hong Kong climbing 8.66%, and Shanghai up 3.57%.
Obama's pledge to produce the largest economic stimulus plan since the 1950s when he takes office in January in bid to revive economy. He also warned things will be worse before they get better.
The Wall Street Journal reported Monday that the U.S. government could sell more than $400 billion in Treasury notes and bills in the final weeks of the year to cover its soaring funding needs, and it looks like it will continue to get the money on the cheap. "So many horrible things have happened and the economy is in such bad shape. The smart thing to do is to hide in Treasurys," according to Ward McCarthy of Stone & McCarthy.
Federal Reserve Vice Chairman Donald Kohn said Monday the "challenge for regulators and other authorities is to create an environment that supports greater bank intermediation, which should help to restore the health of the financial system and the economy," in his brief comments at a Office of Thrift Supervision National Housing Forum. "We want banks to be willing to deploy capital and liquidity, but they must do so in a responsible way that avoids past mistakes and does not create new ones," he added.
Fed Governor Randall Kroszner said banks need to take a much broader view of investment risk as they dig their way out of the current financial crisis, and mortgage-backed securities need to become simpler and much more transparent. "Not only do banks need to assess counterparty credit-worthiness and behavior on an individual basis, they also need to assess counterparties on a collective basis," Kroszner told a risk management conference in Geneva. "They need to understand how their own actions to protect positions can put pressure on key counterparties, especially when other market participants are likely to be taking similar action to protect themselves," he said.
German industrial production fell 2.1% in October, raising the likelihood of a weaker than expected figure for the euro zone, which is due on Friday.
The British Office for National Statistics said output prices fell 0.7% on the month in November. That took the annual rate of output price inflation down to 5.1% last month from 6.7% in October, the lowest since December 2007. The ONS said the fall in output prices was driven by an 8.3% fall in petroleum products.
Apple Inc. (AAPL) shares were sharply higher after a CNBC report that the company confirmed that a version of its popular iPhone will be selling soon through Wal-Mart (WMT), but Apple denied reports that the price for the device will be as low as $99.
In other U.S. markets Monday, the 10-year Treasury note was lower in price at 108-29/32 for a yield of 2.726%, while the 30-year bond was lower at 126-08/32 for a yield of 3.131%.
The dollar index was off 1.10 to 85.80.
January West Texas Intermediate crude oil futures were up $2.21 to $43.02 per barrel on short covering as the energy market looked to recover from recent losses. Crude oil, bolstered earlier this year by speculators and hedge fund excesses, has dropped from a $147.27 high in August. The market was also being aided Monday by strong global stock markets, which gave some hope for increased demand. Also, Saudi Aramco said it will reduce crude supplies to Japan in January for the second month as global demand for fuel slumps. Further, OPEC President Chakib Khelil said the cartel production cuts likely be decided at the Dec. 17 meeting.
February gold futures were higher at $771.60 per ounce.
Among Monday's other stocks in the news, 3M Co. (MMM) says as a result of economic realities such as an expected 10% decline in fourth-quarter organic volume and the negative effects of currency, it has cut its $5.40-$5.48 2008 EPS guidance to $5.10-$5.15 (excluding items). 3M says forex impacts are expected to reduce 2009 sales 6%-7%, and sees $4.50-$4.95 EPS.
Chesapeake Energy (CHK) says it has further reduced capital spending plans for 2009 and 2010 to achieve a cash neutral budget. The company will build up to $4 billion in additional cash resources in 2009 and 2010 through further asset monetizations. Additionally, the company continues to have talks with multiple parties for either minority investment in its midstream operations or purchase of portion of its existing midstream assets, and expects to complete the midstream deal in the first quarter of 2009. The company will amend the acquisition shelf registration statement to reduce the number of shares to be registered from 50 million to 25 million.
MetLife Inc. (MET) expects fourth-quarter premiums, fees, and other revenues of $7.9 billion-$8.5 billion (vs. $7.7 billion in the fourth quarter of 2007) and $1.50-$2.55 EPS (vs. $1.44 a year ago). The company sees 4%-5% 2009 revenue growth, and $3.60-$4.00 operating EPS.
NYSE Euronext (NYX) says November U.S. cash products average daily volume increased 26%, NYSE listed matched volume increased 14%, NYSE Arca and NYSE Alternext U.S. listed matched volume increased 174%, Nasdaq listed matched volume decreased 4%, exchange-traded funds matched volume increased 94%.
A unit of Walt Disney Co. (DIS) entered into a deal to acquire outstanding shares of Jetix Europe N.V. for €11 per share, which will bring Disney's ownership of the pan-European kids entertainment co. to about 96%. Following completion of the deal, Disney intends to obtain ownership of 100% of the shares in Jetix, including through statutory buy-out proceedings.
Worthington Industries (WOR) announced actions to reduce its workforce by about 300 employees in its steel processing and metal framing business segments, about 4% of the total workforce. These actions are in addition to the previously announced (October 23) closings and job cuts.
Heelys, Inc. (HLYS) declared a special cash dividend in the amount of $1.00 per share of common stock. This dividend is payable on December 22, 2008 to shareholders of record on Dec. 15, 2008.
According to an Associated Press report, Playboy Enterprises (PLA) said that Christie Hefner, the daughter of founder Hugh Hefner, is stepping down as chairman and chief executive. The company has named director Jerome Kern to serve as interim non-executive chairman while it looks for a replacement. Hefner will stay on as CEO until Jan. 31, 2009, and remain on the board until a new CEO joins the company.