Dow jumps 889 points

By Charley Blaine and Elizabeth Strott

In a day that cheered bulls and impressed bears, stocks surged to their best finish in about two weeks.

At the close, the Dow Jones industrials were up 889 points, or 10.9%, to 9,065. The Standard & Poor's 500 Index was up 92 points, or 10.8%, to 941, and the Nasdaq Composite Index was up 144 points, or 9.5%, to 1,649.

The gains were the second-largest of the year for the three major indexes and the largest since Oct. 13, when the Dow soared 936 points, or 11.1%. The S&P 500 gained 104 points on Oct. 13 and the Nasdaq jumped 195 points. The two big Dow gains this month are the index’s two best days on record.

The Dow's gain today was just its fifth of the month, but the percentage gain was its sixth largest ever.

Today's big finish was a relief to traders who have seen many recent rallies melt away in the last hour or so of trading.

There were two big reasons for investors to cheer the big day:

• The market didn't fall apart in the last two hours of the session -- a common, discouraging reality in the last few months. In fact, the Dow jumped about 729 points between 2 p.m. and 4 p.m. ET.

• Two important support levels held -- 7,882 for the Dow and 841 for the S&P 500. These were the intraday lows on Oct. 10. The indexes have approached those levels four times since then and moved higher each time; the latest occurred on Monday. A support level occurs when a stock or index hits a low level and generates new buying.

But the biggest question of the day -- does this rally have legs? -- won't be answered until Wednesday at the earliest. Big rallies in this bear market have been followed by big sell-offs. After the Dow's 936-point gain on Oct. 13, it fell nearly 810 points in the next two days.

Futures trading in stock indexes suggested the market will open lower as profit-taking takes hold even as markets in Asia continued to rebound in Wednesday trading.

Today's rebound came after two days of losses and was a continuation of a rally that began in Asia and spread to Europe. And it came with the usual wild bout of volatility. The Dow jumped 331 points by 10 a.m. ET, then lost all of it in the next hour. But the market pushed higher fairly consistently up to the close.

Wednesday's trading will be affected by the Federal Reserve, which will announce whether it will cut interest rates. Wall Street expects the central bank to cut its key federal funds rate -- the rate banks charge each other for overnight loans -- to 1% from 1.5%.

Everybody gets into the rally

Energy and materials stocks led the market. Energy stocks moved higher even as crude oil fell back. Crude was at $62.73 this afternoon, down 0.8% from Monday.

The Amex Oil Index ($XOI.X) was up 13.7% to 876. The Select Sector SPDR-Materials (XLB, news, msgs) exchange-traded fund was up 12.6% to $23.87. It tracks the materials sector of the S&P 500 and includes metals, chemical and agricultural stocks. Alcoa (AA, news, msgs) was the top-performer among the 30 Dow stocks, jumping 19.3% to $10.78.

The rally was broad, with all 30 Dow stocks showing gains. Following Alcoa were Boeing (BA, news, msgs), up 15.5% to $48.91; General Motors (GM, news, msgs), up 14.7% to $6.25; and Verizon Communications (VZ, news, msgs), up 14.6% to $31.65.

In addition, 489 S&P 500 stocks and 89 Nasdaq-100 ($NDX.X) stocks were higher. The Nasdaq-100, which tracks the largest Nasdaq stocks, was up 128 points, or 10.9%, to 1,298.

Volume, while large, wasn't huge. Trading on the New York Stock Exchange floor came to about 1.7 billion shares; 1.8 billion has been typical this year. Nasdaq volume came to 2.8 billion shares; normal is about 2.2 billion shares.

While oil and metals stocks were among the day's biggest winners, so, too, were real estate, steel and retail stocks.

Wal-Stores (WMT, news, msgs) was up 11.1% to $55.17.

Rival Target (TGT, news, msgs) jumped 17.8% to $38.51 on reports that activist investor William Ackman is working up a potential deal to boost the retailer's value. Ackman's hedge fund, Pershing Square Capital Management, owns 10% of Target's shares and has taken a beating on its investment this year. Ackman will hold a conference call for Wednesday to discuss the plan.

Nordstrom (JWN, news, msgs) was up 4.4% to $15.26; Macy's (M, news, msgs) jumped 15.9% to $10.34.

The rally also pulled investment banks Goldman Sachs (GS, news, msgs) and Morgan Stanley (MS, news, msgs) up from early losses. Goldman Sachs finished up 0.7% to $93.57; Morgan Stanley, which had been down 13%, closed up 10.7% to $15.20.

The rebound began in Asia, where losses have been brutal over the past several days. Japan's Nikkei 225 Index ($N225) closed up 6.4% earlier today, and the Hong Kong Hang Seng Index ($HSIX) recovered Monday's steep losses to gain 14.4%.

European stocks followed the Asian markets higher. London's FTSE 100 Index ($GB:UKX) was up 6.4%, and Germany's DAX Index ($DE:DAX) rose 11.3%. The broader Dow Jones Stoxx 600 Index rose 2.9%.

October has been one of the worst months ever for U.S. stocks. If the Dow were to close October at current levels, its 16.6% loss would be its tenth-worst monthly loss since 1928 and the worst since October 1987.

More than $12 trillion has been erased from the market value of equities around the world this month, according to Bloomberg statistics. That's about a third of the damage for the year.

Energy prices -- New York close

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$62.73	$63.22	-$0.49	-37.67%	-34.64%
Heating oil (per gallon)	$1.9120	$1.9144	-$0.0024	-33.21%	-27.83%
Natural gas (per million BTU)	$6.1860	$6.1210	$0.0650	-16.83%	-17.33%
Unleaded gasoline (per gallon)	$1.4555	$1.4769	-$0.0214	-41.42%	-41.56%

Consumer confidence slumps; home prices sink

Two reports this morning offered more evidence of a difficult economy.

The Conference Board's report on consumer confidence showed a reading of 38 in October, a huge drop from the revised reading of 61.4 in September.

And the S&P/Case-Shiller index of home prices plunged 16.6% in August, year over year, after a 16.3% year-over-year drop in July. The index has fallen every month since January 2007.

Prices were lower in all 20 of the major cities the index covers, with Phoenix and Las Vegas down nearly 31% from last year.

Dallas and Charlotte, N.C., were the cities with the best performance, but they weren't great. Dallas saw a decline of 2.7%, and home prices in Charlotte were down 2.8% from last year.

"There's still quite a bit further for prices to go down, even though the volume has probably bottomed out," William Cheney, chief economist at John Hancock Financial Services, told Bloomberg Television. "Prices will probably find a bottom sometime next year."

Home prices have fallen 20.3% since peaking in June 2006.

Boeing reaches deal with machinists

Boeing shares soared after announcing it had reached an agreement with its biggest labor union to end a seven-week-old strike.

Boeing and the International Association of Machinists announced the agreement late Monday. The two sides agreed to a new contract that gives the union workers better job security and benefits while allowing Boeing to save costs by using cheaper contractors for some jobs.

The agreement still has to be approved by the 27,000 striking members of the union.

The machinists union went on strike on Sept. 6; the labor action has cost the company a whopping $5.2 billion in lost revenue. Boeing had estimated that the strike would cost the company $100 million a day.

Whirlpool to cut jobs

Shares of Whirlpool (WHR, news, msgs) slumped 8.3% to $45.87 after the appliance maker posted lower profit in the third quarter and said it will cut 5,000 jobs.

Whirlpool earned $163 million, or $2.15 per share, down from $175 million, or $2.20 per share, last year. The consensus estimate was $1.69 per share.

"The global credit crisis has had a profound negative impact on what was already a weakening and very fragile global economy," Chief Executive Officer Jeff Fettig said in a statement. "Declining home values, rising unemployment and very low consumer confidence levels will likely prolong a negative demand environment at least through the middle of 2009."

Whirlpool expects profit of between $5.75 and $6 per share for 2008, lower than a previous forecast of $7 to $7.50 per share.

Volkswagen tops Exxon as biggest company

Germany's Volkswagen (VLKPY, news, msgs) has surpassed ExxonMobil (XOM, news, msgs) as the world's biggest company by market capitalization after Porsche (POAHF, news, msgs) this weekend announced a move to increase its stake in the company to 75% from 42.6%.

The announcement sent the stock surging as much as 93% in today's session, prompting short sellers to cover their positions.

Only about 5% of the company's stock is now freely traded in the market.

At its high of the trading session, Volkswagen's value was about $367 billion, topping ExxonMobil's current $343 billion market capitalization.

Profit jumps at BP

BP (BP, news, msgs) said it earned $8.05 billion in the third quarter, an 83% jump from the $4.41 billion it earned a year ago.

Adjusted earnings came in at $8.88 billion, ahead of analysts' expectations for $6.8 billion.

Revenue surged 45% to $103.17 billion in the quarter.

BP shares rose 15.9% to $46.52.

Automakers next for bailout?

General Motors shares soared because it could be the next big company to get federal help.

The Energy Department is working on a plan to provide $5 billion to GM, The Wall Street Journal reported late Monday, to help ease the automaker's path toward a merger with privately held Chrysler.

The $5 billion would come from the $25 billion in low-interest loans Congress approved last month to assist the auto industry in building more-efficient vehicles.

"These companies are both hurting," Louis Lataif, dean of Boston University's School of Management, told Bloomberg News. Lataif is a former Ford Motor (F, news, msgs) executive. "Absent government intervention, it's difficult to see how this merger makes sense."

• Talk back: Should the automakers get a bailout?

The White House said it isn't ruling out a role for the Treasury in an auto bailout.

White House spokeswoman Dana Perino on Monday said that "it's possible that some of those financing arms could be a part of the rescue package, the TARP, as they call it, at the Treasury Department. That's one of the reasons Treasury has been in contact with them."

While GM shares jumped, Ford shares were up 5.9% to $2.15.

Last week, Michigan's 17-member congressional delegation signed a letter to Treasury Secretary Hank Paulson and Federal Reserve Chairman Ben Bernanke asking for federal help for the automakers. The Big Three have seen sales slump 20% in the first nine months of the year compared with last year.

Moody's on Monday lowered GM's credit rating to Caa2, eight grades below what is considered investment quality.

Andy 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	0.750%	0.730%	0.020	-16.67%	-76.11%
5-year Treasury note yield	2.729%	2.651%	0.078	-8.61%	-21.01%
10-year Treasury note yield	3.820%	3.729%	0.091	-0.18%	-5.33%
30-year Treasury bond yield	4.172%	4.105%	0.067	-3.09%	-6.44%
Currencies
U.S. Dollar Index	87.600	87.610	-0.010	10.38%	14.22%
British pound in dollars	$1.5916	$1.5552	0.0364	-10.71%	-19.99%
Dollar in British pounds	£0.6283	£0.6430	-0.0147	12.00%	24.99%
Euro in dollars	$1.2719	$1.2464	0.0255	-9.79%	-12.97%
Dollar in euros	€ 0.7862	€ 0.8023	-0.0161	10.86%	14.91%
Dollar in yen	97.70	92.83	4.87	-7.86%	-12.65%
Canadian dollar in U.S. dollars	$0.784	$0.771	$0.0131	-16.63%	-21.02%
U.S. dollar in Canadian dollars	$1.276	$1.297	-$0.0205	19.97%	26.63%
Commodities
Gold	$740.50	$742.90	-$2.40	-15.93%	-11.63%
Copper	$1.8585	$1.8050	$0.05	-35.45%	-38.89%
Silver	$8.7900	$9.1950	-$0.41	-28.39%	-41.09%
Corn	$3.9075	$3.8525	$0.06	-19.85%	-14.22%
Crude oil (NYMEX) (per barrel)	$62.73	$63.22	-$0.49	-37.67%	-34.64%