Stocks up again in light trading
NEW YORK – Wall Street finished higher Friday, wrapping up its biggest five-day rally in more than 75 years, even as investors digested signs of a bleak holiday season for retailers and fears that a flurry of reports next week will show more economic distress.
On the short trading day, investors snapped up the battered shares of blue-chip stalwarts Citigroup Inc. and General Motors Corp., fueling a rally that has surprised many market experts whipsawed by wild swings during the past three months.
The market got big boosts over the past week from President-elect Barack Obama naming his economic team, the government propping up Citigroup, and the Federal Reserve deciding to buy massive amounts of mortgage-backed securities. These efforts reassured the market that broad efforts are still being made to fight the financial crisis that intensified in September with the bankruptcy of Lehman Brothers Holdings Inc.
Just last week, the S&P 500 index fell to its lowest point since 1997 while Citigroup and GM were trading at 15-year and 70-year lows, respectively – touching off worries about how far the market would slide.
While the stock market’s strong rebound was certainly welcome, analysts were hesitant about getting too optimistic. Not only were trading volumes very light on Friday, but investors will be digesting a slew of economic data next week ranging from a reading on the manufacturing sector to the all-important employment report from the Labor Department. Both are expected to be dismal.
“We’re seeing some confidence come back into this stock market, but I don’t think that’s necessarily a reason to be dropping our guard,” said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York. “You still have to be cautious. There’s opportunity, but you have to be extremely selective and defensive.”
On Friday, the Dow rose 102.43, or 1.17 percent, to 8,829.04.
Broader stock indicators also rose. The S&P 500 index advanced 8.56, or 0.96 percent, to 896.24, while the Nasdaq composite index rose 3.47, or 0.23 percent, to 1,535.57 after spending much of the session lower.
The Russell 2000 index of smaller companies rose 4.28, or 0.91 percent, to 473.14.
Government bonds rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, tumbled to 2.93 percent from 2.99 percent late Wednesday. The yield on the three-month T-bill, considered one of the safest investments, edged up to 0.05 percent from 0.03 percent Wednesday.
Citigroup was by far the biggest gainer among the 30 stocks that make up the Dow industrials, rising $1.24, or 17.6 percent, to $8.29. Just a week ago, the bank’s stock was selling off precipitously, before the government put together a plan to backstop more than $300 billion of the bank’s assets.