Stocks Stage a Post-Holiday Rally

Major indexes rebounded in Friday's shortened session as investors snapped up beaten-dwon financial and retail issues

Just like ordinary Americans, with their Thanksgiving rituals of pumpkin pie and football viewing, the stock market has its own Turkey Day traditions. And one of them was observed Friday, much to the relief of equity investors.

The market, which fell Wednesday, historically rises on the day after Thanksgiving following pre-holiday loss, notes Standard & Poor's MarketScope. And that was the case for Friday's holiday-shortened session, when major indexes scored solid gains.

On Friday, the Dow Jones industrial average gained 181.84 points, or 1,42%, to 12,980.88. The broader S&P 500 index was up 23.93 points, or 1.69%, to 1,440.7. The index started 2007 at 1418, and is now in slightly positive territory for the year. The Nasdaq composite index was higher by 34.45 points, or 1.35%, to 2,596.6.

Financial and retailer stocks were pacesetters on bargain hunting and short covering. Trading was slow as market closed early. On the New York Stock Exchange, 26 issues advanced in price for every five that declined. Nasdaq breadth was 21-6 positive.

Peter Cardillo, chief market economist at Avalon Partners, said that Friday's market may have seen some bargain hunting after Wednesday's sharp declines. "I just think it's purely a technical bounce from Wednesday's sharp sell-off," he adds.

Indeed, when traders return to work Monday they will be facing the same factors that drove the market's recent weakness. Market players remain worried by the Federal Reserve's projections of sluggish GDP growth over the next 3 years.

There were no significant economic reports scheduled for release during Friday's shortened session. Many Fed officials are slated to speak next week, and the government will release third-quarter GDP results next Thursday, which are expected to be revised to the 5% growth level.

Credit concerns remained a focus on Wall Street. According to a Wall Street Journal report, Bank of America (BAC), Citigroup (C), and JPMorgan Chase (JPM) are drawing up a plan to ease the credit markets are expected to ask others in the industry to help out next week. The three are spearheading an effort to raise billions of dollars for a new fund that is supposed to help structured investment vehicles sell hard-to-value paper they hold without further unnerving already jittery credit markets.

The banks have asked BlackRock (BLK) to act as the lead asset manager for the $75 billion fund they are creating to support the asset-backed securities market, a source told Reuters. According to the Journal, bankers involved in assembling the plan have said they would like to get the superfund running by January.

The Federal Reserve's gloomier than expected projections for economic growth issued earlier in the week continued to reverberate on Wall Street Friday. Economist Jan Hatzius of Goldman Sachs (GS) wrote in a note Friday that although the FOMC minutes sounded quite hawkish, the firm expects the FOMC to change its mind on the need for further monetary easing -- partly because of deteriorating economic data and partly because of the tightening in financial conditions. But, according to Hatzius, "[t]he most important risk is not the decline in broad equity market indexes, but the increased risk of damage to the financial system signaled by the sharp downturn in financial sector stock prices."

"Our own views are even more bearish on the near-term growth outlook than those of the FOMC, but considerably more optimistic about the long-term picture," wrote Hatzius. Goldman expects real GDP to grow at close to a 3% trend in the longer term. "Consequently, we expect a higher unemployment rate and more room for monetary easing."

In the energy markets Friday, January West Texas Intermediate crude oil futures, which fell 74 cents Wednesday, climbed in late trading Friday to $97.96 per barrel. According to a Reuters report, Roy Mason of Oil Movements said that OPEC oil exports, excluding Angola, will rise by 720,000 barrels per day in the four weeks to Dec. 8.

December gold futures surged to $822.40 on Friday, even though the dollar index was higher and the euro tumbled from record highs on worries a world financial turmoil will cause a bigger-than-expected slowdown in the euro zone, prompting the single currency to tumble.

Among stocks in the news Friday, Arcelor Mittal (MT) confirmed it is in talks with controlling shareholders in China Oriental Group Limited about future co-operation and including increasing its stake in the company. Arcelor currently holds a 28% equity stake in China Oriental Group.

Bristol-Myers Squibb (BMY) and Pierre Fabre Medicament terminated their license agreement for the development of vinflunine, a chemotherapy agent under investigation for the treatment of advanced or metastatic bladder cancer and other tumor types.

Broadcom (BRCM) announced that a federal judge has let stand a jury verdict that found that Qualcomm (QCOM) infringes three Broadcom patents. Broadcom will now seek to enjoin Qualcomm from making, using, selling and developing third generation (3G) WCDMA and EV-DO cellular chips that infringe any of the patents.

CIBC World downgraded shares of Hecla Mining (HL) to sector underperform from sector perform.

Massey Energy (MEE) said a higher court overturned a $76 million judgment against the company.

European and Asian markets rose even though central bank officials worried economies slowing down.

In London, the FTSE 100 index gained 1.59% to 6,253.40. In Paris, the CAC 40 index added 1.51% to 5,497.95. Germany's DAX index rose 0.45% to 7,596.40.

Hong Kong's Hang Seng index advanced 2.06% to 26,541.09. Shanghai's benchmark index rose 0.96%.

Japan's markets were closed Friday for a holiday.

Treasury Market

Bonds, which surged Wednesday in a flight to safety from falling stocks, were a bit lower Friday morning as U.S. stocks moved higher. The 10-year note was lower at 101-27/32 for a yield of 4.029%, while the 30-year bond was higher at 109 for a yield of 4.453%.

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