Dow up 62 as investors look past economic data

By Charley Blaine and Elizabeth Strott

Investors shrugged off yet another round of weak economic news and pushed stocks higher today on hopes that efforts to revive the slumping economy will work.

The rally pushed the Dow Jones industrials and the Nasdaq Composite Index to their sixth gains in the last eight sessions and the Standard & Poor's 500 Index to its fifth gain in eight sessions.

At the close, the Dow was up 62 points, or 0.7%, to 9,015. The Nasdaq was up 24 points, or 1.5%, to 1,652, and the S&P 500 added 7 points, or 0.8%, to 935.

Early futures trading suggests a modestly higher open on Wednesday.

Leading the market higher were technology, consumer and materials stocks. Hewlett-Packard (HPQ, news, msgs) was the top performer among the 30 Dow stocks, up 8.2% to $39.31. General Motors (GM, news, msgs) and Walt Disney (DIS, news, msgs) were also higher, rising 6.2% to $3.94 and 3.5% to $24.31, respectively.

Materials stocks rallied after fertilizer maker Mosaic (MOS, news, msgs) reported better-than-expected earnings. The stock rose 2.4% to $38.56. The Select Sector SPDR-Materials (XLB, news, msgs)exchange-traded fund, which tracks the materials sector of the S&P 500, was up 2.2% to $24.15.

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Meanwhile, oil driller Weatherford International (WFT, news, msgs) jumped 13.8% to $14.31. Crude oil briefly reached $50.47 a barrel in New York before settling at $48.58, down 23 cents on the day.

Futures trading suggests crude may rebound to nearly $60 a barrel by this summer. Crude has jumped 37% since Dec. 24.

Retail gasoline averaged $1.688 a gallon today, up from $1.672 on Monday, AAA's Daily Fuel Gauge Report showed. The national average has jumped 7 cents a gallon since dropping to $1.6163 a gallon on Dec. 31. The average peaked at $4.114 on July 17.

The day's gloomiest news came from the minutes of the Federal Reserve's Dec. 15-16 meeting. The minutes showed that members of the Federal Open Market Committee, the central bank's rate-making body, were worried about "the distinct possibility of a prolonged contraction."

That, however, was a worst-case scenario. The panel's expectation was that any recovery would not begin until the second half of 2009 at the earliest.

Because of those worries, the Fed cut its key interest rate practically to zero and decided to spend billions of dollars buying mortgage and other securities to try to boost the economy.

The other bad news:

• The Institute of Supply Management's service sector survey showed a contraction for the third straight month, although the results weren't as bad as expected. The ISM's index of non-manufacturing businesses rose to 40.6 in December from a record low of 37.3 in November. But a reading below 50 means the sector is contracting.

• A report on pending home sales from the National Association of Realtors is expected to show a decline of 0.7% in November. Pending home sales are a leading indicator of the housing market because they track contract signings.

• Factory orders plummeted 5.6% in November from October and 15.2% from November 2007, the Commerce Department reported. That followed a revised 6% drop in October from September. Economists had predicted a 2.6% drop in orders. The October and November declines were the biggest two-month fall since the Commerce Department started recording the data in 1992.

• After the close, Dow component Alcoa (AA, news, msgs) announced it would cut output and chop 15,000 jobs from its global work force, about 14.5% of its total, because of the recession. The company will also cut smelter capacity, freeze salaries and chop capital expenditures by half. The company will report fourth-quarter earnings after Monday's close.

Energy prices -- New York close

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$48.58	$48.81	-$0.23	8.92%	8.92%
Heating oil (per gallon)	$1.6263	$1.5763	$0.0500	15.69%	15.69%
Natural gas (per million BTU)	$5.9830	$6.0720	-$0.0890	6.42%	6.42%
Unleaded gasoline (per gallon)	$1.1892	$1.1824	$0.0068	17.95%	17.95%

Apple to cut iTune prices, strip copy protection from songs

Investors weren't impressed with Apple's (AAPL, news, msgs) presentation at today's Macworld conference in San Francisco.

Shares fell 1.7% to $93.02. The company did announce that it has stripped copy protection from all the songs in its iTunes music store and announced plans to charge as little as 69 cents a track.

Under a new variable pricing plan, songs will cost 69 cents, 99 cents or $1.29 starting in April, with most albums going for $9.99, Apple marketing head Phil Schiller told Macworld attendees. He spoke in place of CEO Steve Jobs, who said Monday that he was undergoing treatment for a "hormone imbalance."

Apple had drawn criticism for using so-called digital-rights management, or DRM, on most tracks, prompting Jobs two years ago to make a public plea to music labels to change their licensing terms. The protections prevented customers from listening to music on unauthorized devices and limited the copies they could burn onto CDs. The company also faced competition from Amazon.com (AMZN, news, msgs), which charges as little as 79 cents a song -- with no copy protection.

Middle East conflict, OPEC put oil in spotlight

Crude oil has been rallying in large part because the conflict between Israel and Hamas entered its 11th day. Iran, a member of the Organization of Petroleum Exporting Countries and a supporter of Hamas, is pushing for a suspension of oil exports to Israel and its allies.

In December, OPEC announced production cuts of 4.2 million barrels a day from September levels, and Kuwait and Qatar plan to implement those cuts to Asia starting this month.

At the same time, natural gas supplies from Russia to Eastern Europe were halted today as a conflict between Russia's Gazprom and Ukraine escalated. Europe receives about 20% of its gas from Russia through Ukraine.

The dispute between Russia and Ukraine is a resumption of one that took place in 2006, when the former halted exports for three days, causing shortages within the European Union.

The head of Ukraine's gas company said talks will resume with Russia on Thursday. Gazprom chiefs have not made any comments.

Merrill's McCann to leave B of A

The head of Merrill Lynch's "thundering herd" brokerage unit will leave just days after Bank of America's (BAC, news, msgs) completed acquisition of the company.

Bob McCann's departure raises questions on how Bank of America will incorporate Merrill Lynch, which it purchased on Jan. 1. Bank of America named Dan Sontag, a Merrill Lynch veteran, to succeed McCann.

"This is going to create a lot of shock waves," Mindy Diamond, chief executive officer of Diamond Consultants, told Bloomberg News. "This may accelerate the decisions of those who have taken a wait-and-see attitude. B of A and (Merrill CEO John) Thain have been saying that Merrill will be operated somewhat autonomously, but the brokers have been skeptical of that. McCann's departure will definitely upset a lot of people."

CNBC reported this morning that McCann could go to rival Morgan Stanley (MS, news, msgs). McCann had been at Merrill for 26 years and had run the company's brokerage unit since 2003.

Separately, Bank of America CEO Ken Lewis told employees today that he and other top executives wouldn't take bonuses for 2008.

Prosecutors want Madoff in jail

Federal prosecutors want disgraced Wall Street titan Bernie Madoff held in jail without bail.

Prosecutors say Madoff and his wife sent $1 million in watches, jewelry and other valuables to family members in violation of an injunction freezing his assets.

"The defendant's recent actions amount to obstruction of justice," Assistant U.S. Attorney Marc Litt told U.S. Magistrate Judge Ronald Ellis at an hourlong bail hearing late Monday.

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Madoff sent five packages, including $25 cuff links and a $200 pair of mittens, to his brother, son and daughter-in-law, who were in Florida over the New Year's holiday.

Madoff's attorney, Ira Sorkin, called the items heirlooms and said it was merely a mistake. "We maintain it happened innocently," Sorkin told the court. "He's not a threat to the community, and there's no danger he's going to flee."

Madoff posted a $10 million bond after he was charged Dec. 11 with constructing a $50 billion Ponzi scheme. He has since been under house arrest.

The judge didn't make an immediate decision on the government's request to revoke Madoff's bail and will likely decide later this week.

Meanwhile, members of Congress grilled the Securities and Exchange Commission earlier Monday about its failure to discover the fraud despite numerous red flags.

"What we may have in the Madoff case is not necessarily a lack of enforcement and oversight tools, but a failure to use them," Rep. Spencer Bacchus, R-Ala., said at the hearing.

SEC Inspector General David Kotz said he will conduct a thorough investigation of how the fraud occurred.

Last week, the court-appointed trustee for Bernard L. Madoff Investment Securities, Irving Picard, said he has reached out to more than 8,000 potential victims of Madoff's scam. The Securities Investor Protection Corp. can pay out as much as $500,000 per customer for theft of securities from a brokerage, including a maximum of $100,000 on claims for theft of cash.

Bankruptcies jump in 2008

It may not come as much of a surprise, but the number of consumer bankruptcies rose by 32% in 2008 to 1.06 million, according to the American Bankruptcy Institute.

"Consumers are under great financial stress, with no immediate end in sight," said ABI executive director Samuel Gerdano, in a statement. "We expect the upward spike in personal bankruptcies to continue in 2009."

In 2007, 801,840 American consumers filed for bankruptcy.

Andrew Rosenbaum contributed to this report.

Short hits from the markets -- New York close

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	0.130%	0.085%	0.045	13.04%	13.04%
5-year Treasury note yield	1.704%	1.694%	0.010	9.86%	9.86%
10-year Treasury note yield	2.505%	2.488%	0.017	11.63%	11.63%
30-year Treasury bond yield	3.069%	3.040%	0.029	14.05%	14.05%
Currencies
U.S. Dollar Index	83.720	83.575	0.145	1.91%	1.91%
British pound in dollars	$1.4910	$1.4910	0.0000	1.19%	1.19%
Dollar in British pounds	£0.6707	£0.6707	0.0000	-1.18%	-1.18%
Euro in dollars	$1.3508	$1.3515	-0.0007	-3.58%	-3.58%
Dollar in euros	€ 0.7403	€ 0.7399	0.0004	3.71%	3.71%
Dollar in yen	93.23	93.42	-0.19	2.85%	2.85%
Canadian dollar in U.S. dollars	$0.845	$0.845	$0.0002	3.32%	3.32%
U.S. dollar in Canadian dollars	$1.184	$1.185	-$0.0004	-3.21%	-3.21%
Commodities
Gold	$866.00	$857.80	$8.20	-2.07%	-2.07%
Copper	$1.5830	$1.4590	$0.12	12.27%	12.27%
Silver	$11.4450	$11.2700	$0.18	1.33%	1.33%
Corn	$4.2750	$4.1125	$0.16	5.04%	5.04%
Crude oil (NYMEX) (per barrel)	$48.58	$48.81	-$0.23	8.92%	8.92%