NEW YORK — Wall Street staged a big advance in the next-to-last session of 2008 Tuesday after Washington’s latest lifeline to the auto industry bolstered hopes that the government will do whatever is necessary to cut short the recession.
Investors found solace in news that General Motors Corp.’s troubled financing arm received $5 billion of financing. The Treasury Department said late Monday it would provide the money to GMAC Financial Services LLC from the $700 billion bank-rescue program.
The injection is on top of the $17.4 billion in loans the Bush administration on Dec. 19 agreed to provide to the auto industry.
GMAC said Tuesday it would immediately resume lending to certain customers it had previously said were too great a risk for auto loans because of tight credit markets.
“This is trying to slow down the economic train wreck,” said Jack Ablin, chief investment officer at Harris Private Bank. “Investors are taking a step back and realizing that this will enable auto buyers to finance their cars and add liquidity to the market.”
Ablin also said the move will have an effect on the entire economy, especially amid a backdrop of sluggish consumer spending, which drives more than two-thirds of the U.S. economy.
Wall Street got another disappointing reading about the mood of Americans after the Conference Board reported its Consumer Confidence Index dropped to a record low. The trade group reported the index’s reading fell to 38 in December from a revised 44.7 in November, well below the expectation of 45 economists surveyed by Thomson Reuters.
The Dow Jones industrial average rose 184.46, or 2.17 percent, to 8,668.39.
Broader indexes also moved higher. The Standard & Poor’s 500 index rose 21.22, or 2.44 percent, to 890.64, leaving it down 40.79 percent for the year. The Nasdaq composite index added 40.38, or 2.67 percent, to 1,550.70, leaving it down 43.06 percent for 2008.
Subodh Kumar, global investment strategist at Subodh Kumar & Associates in Toronto, said the market’s moves in the final days of the year are more noteworthy than some investors realize; stocks have been fairly steady despite low volume that could easily lead to sharp declines. But he predicts trading will remain volatile into mid-2009. “It’s still relatively encouraging that the markets have been able to hold up,” he said.
Investors might have been able to overlook the disappointing consumer data after a surprise uptick in the Chicago Purchasing Managers’ index, which measures business conditions across Illinois, Michigan and Indiana.
