Thanksgiving rally boosts Dow 247

By Charley Blaine and Elizabeth Strott

The stock market gave investors something to be thankful for: the first four-day rally for the major indexes since spring.

The Dow Jones industrials finished the day up 247 points, or 2.9%, to 8,727. The Standard & Poor's 500 Index jumped 30 points, or 3.5%, to 888. And the Nasdaq Composite Index, thanks to big gains for such key stocks as Cisco Systems (CSCO, news, msgs) and Apple (AAPL, news, msgs), powered 67 points higher, or 4.6% to 1,532. It was the Nasdaq's first close above 1,500 since Nov. 14.

It was the first four-day rise for the Dow since April 15-18 and the first for the S&P 500 and Nasdaq since May 27-30. The Dow's point gain over the four days is its biggest ever; the 15.6% percentage gain is its biggest since April 5-8, 1932. The S&P 500's percentage gain was its biggest since 1933.

Meanwhile, interest rates moved lower, with the yield on the 10-year Treasury note briefly dropping under 3% for the first time ever.

Financial markets will close for Thanksgiving and open for a half-day on Friday.

Today's gains came despite another round of lousy economic news, including weak durable-goods orders and the worst new-home sales report since 1991. The gains were briefly trimmed by reports of terror attacks in Mumbai, India, that left at least 78 dead.

But volume was light -- typical for the day before Thanksgiving. Trading volume on the floor of the New York Stock Exchange hit about 1.2 billion shares. Nasdaq volume topped 1.8 billion shares.

After the close, the Federal Reserve said it had approved the merger of Bank of America (BAC, news, msgs) and Merrill Lynch (MER, news, msgs). The combined companies will control upwards of 12% of all deposits in U.S. financial institutions.

A week for the bulls

Bulls have to be cheered by the market's performance since Friday, which comes in the face of mostly bad economic news and weak corporate earnings and guidance.

With today's close, the Dow is up 1,277 points, or 17.1%, since its intraday low of 7,449.39 on Friday. The S&P 500 is up 19.9% from its Friday low, with the Nasdaq up 18.3%.

Whether the rally can be sustained is a big question. Many analysts believe the Dow will trade between 8,000 and 10,000 for some time.

But any gains will come grudgingly, given slumping economies around the world. China even cut short-term interest rates today in a bid to boost economic growth.

Still, many investors are cheered by the economic team being assembled by President-elect Barack Obama and his insistence that a new economic stimulus package be developed and passed by January.

The most startling performance so far this week has come from homebuilding stocks. These moved higher as investors cheered the Federal Reserve's decision to buy mortgage-backed securities from Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs). Bankrate.com said the national rate on a 30-year fixed rate mortgage today was 5.8% today, down from 6% on Tuesday.

The Philadelphia Housing Sector Index ($HGX.X) was up 11% to 81.96 today. The index is up nearly 36% this week, tops among the indexes that Market Dispatches tracks. Lennar (LEN, news, msgs) was up 22.7% to $7.40 today; Centex (CTX, news, msgs) was up 19.1% to $9.29.

• For a screen of homebuilding stocks, click here.

But crude oil was higher as production cuts from the Organization of Petroleum Exporting Countries were being reflected in global markets. Also, an Energy Department report showed lower-than-expected domestic supplies.

Crude oil rose 7.2%% to $54.44 a barrel this afternoon and is up 9% this week. Energy stocks were higher. Chevron (CVX, news, msgs) and ExxonMobil (XOM, news, msgs), up 4.4% to $79.93 and 3.6% to $80.89, respectively, added 49 points to the Dow today.

Oil and gas producer Apache (APA, news, msgs) was up 6.3% to $78.33, and offshore drilling company Transocean (RIG, news, msgs) added 5.5% to $67.

• Top Stocks blog: Upswing for oil prices?

Twenty-eight of the 30 Dow stocks were higher, with General Motors (GM, news, msgs) the percentage gainer, up 35.1% to $4.81 on hopes that Congress will come through with bailout legislation. Rival Ford (F, news, msgs) was up 29.5% to $2.15.

Since Thursday, when GM hit an intraday low of $1.70, its shares have jumped 183%. Ford shares are up 113%. GM and Ford were the biggest percentage gainers among S&P 500 stocks.

The day's laggard was Johnson & Johnson (JNJ, news, msgs), down 0.7% to $58.27. The other decliner among the blue chips: Procter & Gamble (PG, news, msgs), down 0.03% to $63.16.

Meanwhile, 447 S&P 500 stocks were higher, along with 97 Nasdaq-100 ($NDX.X) stocks. The Nasdaq-100, which tracks the largest Nasdaq stocks, was up 51 points, or 4.4%, to 1,193. Apple closed up 4.6% to $95 and is up 20% since bottoming at $79.14 on Friday. Cisco was up 6.3% to $16.39.

With one trading day to go in November, the Dow is down 6.4%, with the S&P 500 down 8.4% and the Nasdaq down 11%. For the year, the Dow is down 34.2%, the S&P 500 off 39.6% and the Nasdaq down 42.2%.

• Top Stocks blog: GM shares too risky for its employees?

Energy prices -- New York close

	Wed.	Tues.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$54.44	$50.77	$3.67	-19.72%	-43.28%
Heating oil (per gallon)	$1.7367	$1.6988	$0.0379	-13.44%	-34.45%
Natural gas (per million BTU)	$6.8780	$6.3860	$0.4920	1.40%	-8.08%
Unleaded gasoline (per gallon)	$1.1798	$1.0949	$0.0849	-18.14%	-52.63%

Jobless claims, durable-goods and more

The number of Americans filing for jobless benefits for the first time fell by 14,000 to 529,000 last week, the Labor Department reported this morning. The report came out early because of Thanksgiving.

The number of continuing claims fell by 54,000 to 3.96 million, but the four-week average of initial jobless claims rose to a 25-year high of 518,000 last week.

• Get free, real-time stock quotes on MSN Money

In other economic news: Durable-goods orders fell 6.2% in October, the Commerce Department reported this morning -- the biggest decline in two years. Economists had expected a 2.5% decline. September durable goods orders were revised lower to a 3.3% decline.

Excluding transportation, orders fell 4.4% last month.

"This report confirms that the profound distress in the financial markets (that) developed after Lehman's bankruptcy filing is taking a heavy toll on the rest of the economy," Nomura chief economist David Resler wrote in a note to clients this morning.

The University of Michigan/Reuters report on consumer sentiment indicated that Americans were worried about the state of the economy. The index declined to a reading of 55.3 after a previous reading of 57.9 earlier this month.

New-home sales fall to '91 level

Another report showed continued weakness in the housing market. New-home sales fell 5.3% in October to an annualized rate of 433,000, the lowest level since 1991, the Commerce Department reported this morning. Economists had expected a more modest 4.8% decline. Sales gained 0.7% in September.

On a year-over-year basis, new-home sales plummeted a whopping 40.1% in October.

The report follows Tuesday's news that home prices plunged a record 17.4% in October from the same month last year. The S&P/Case-Shiller home price index fell 16.6% in the third quarter from last year, its worst quarterly decline ever.

Earlier this week, the National Association of Realtors said existing-home sales fell 3.1% in October to a seasonally adjusted annual rate of 4.98 million. Existing home sales fell 1.6% on a year-over-year basis.

An ugly retail picture

Consumers held on tightly to their wallets in October as the market continued to spiral lower and worries about the economic crisis grew.

Consumer spending fell 1% in October, the biggest monthly decline since September 2001. The drop was in line with analysts' expectations and followed a 0.3% decline in September. Consumer spending makes up about two-thirds of the U.S. economy.

Black Friday, the unofficial kickoff to the holiday shopping season, is the day after Thanksgiving, and retailers are bracing for what could be the worst season in years.

"Everybody is cutting back at the same time," Christopher Low, chief economist at FTN Financial, told Bloomberg News. "This takes us out of the generic recession category and puts us in the severe recession category."

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The problems aren't just at the mall: Online retail spending in November and December is expected to reach $29.2 billion, flat from the same period last year, according to market research firm comScore.

Late Tuesday, J. Crew Group (JCG, news, msgs) lowered its forecast for fiscal 2008 to between $1.11 and $1.16 per share, down from previous guidance of between $1.44 and $1.54 per share the company made in August.

It was the third time J. Crew has lowered its forecast this year. The stock fell 2% to $10.83.

Tiffany (TIF, news, msgs) also had a disappointing third quarter. The high-end jewelry retailer earned $44 million, or 35 cents per share, a 57% plunge from the $102 million, or 74 cents per share, in the same period last year.

The results topped Wall Street's estimate of 25 cents per share, but the company lowered its full-year outlook to between $2.30 and $2.50 per share. Analysts are looking for $2.58 per share for the year.

"Customers have adjusted their spending in reaction to economic conditions and near-term uncertainties," Chief Executive Michael Kowalski said in a statement.

Tiffany shares, however, closed up 0.4% to $20.91.

Up-market retailers had managed to weather the beginning of the economic downturn late last year, but now they are suffering along with the rest of the retailers.

"We haven't seen the full impact of what's going to happen to high-end retailers," Adrienne Tennant, an analyst at Friedman, Billings, Ramsey, said to Bloomberg News on Monday. "It's not a matter of desire anymore for this customer, it's a matter of ability."

Weak economy puts Deere in headlights

Heavy-equipment maker Deere (DE, news, msgs) this morning reported an 18% decline in fiscal-fourth-quarter profit. Wall Street didn't care; the stock was up 8% to $35.76.

The company earned $345 million, or 81 cents per share, down from $422 million, or 94 cents per share, last year. The results missed analysts' expectations for 99 cents per share.

Deere gave a cautious forecast for fiscal 2009: The company expects net income of $1.9 billion, lower than the $2.2 billion analysts expect. The company blamed "ongoing turmoil in the financial markets" for the weak earnings forecast.

BCE leveraged buyout in jeopardy

Canada's biggest phone company, BCE (BCE, news, msgs) -- the parent of Bell Canada -- saw shares plunge 34.1% to $20.63 this afternoon as worries grew that its plans to go private may not be successful.

Independent valuation firm KPMG said that BCE would probably be insolvent if it goes through with its planned $42 billion leveraged buyout, originally set for Dec. 11. The acquirers include Providence Equity Partners and the Ontario Teachers' Pension Plan.

The deal was made back in June 2007, when credit conditions were great and the financial world was booming. Since then the credit markets and stock markets have crumbled amid a global economic recession.

Rush to refinance after Fed plan

Many Americans who've been wanting to buy homes now have more motivation to get into the housing market after the Federal Reserve and Treasury Department announced plans to boost consumer and mortgage lending on Tuesday.

The Wall Street Journal reported this morning that the government's moves have caused many people to apply to refinance their home loans, as rates on 30-year fixed-rate mortgages dropped to about 5.5% for borrowers with good credit scores after beginning the day Tuesday at around 6.38%. It was the biggest one-day drop in seven years, according to research firm Holden Lewis.

On Tuesday, the Fed announced that it will buy up to $100 billion in debt issued by Fannie Mae and Freddie Mac through auctions that will start next week. The Fed will also purchase up to $500 billion in mortgage-backed securities backed by Fannie and Freddie.

At the same time, the Fed and the Treasury Department announced new efforts to try to ease strains in the consumer credit markets. The Fed said its new Term Asset-Backed Securities Loan Facility will lend up to $200 billion to institutions involved in the issuance of consumer and small-business debt such as credit card loans, student debt and auto loans.

Andrew Rosenbaum contributed to this report.

Short hits from the markets -- New York close

	Wed.	Tues.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	0.030%	0.100%	-0.070	-93.10%	-99.04%
5-year Treasury note yield	2.018%	2.004%	0.014	-28.47%	-41.59%
10-year Treasury note yield	3.001%	3.092%	-0.091	-24.41%	-25.63%
30-year Treasury bond yield	3.563%	3.632%	-0.069	-18.45%	-20.09%
Currencies
U.S. Dollar Index	85.790	85.060	0.730	-0.64%	11.86%
British pound in dollars	$1.5330	$1.5466	-0.0135	-4.71%	-22.93%
Dollar in British pounds	£0.6523	£0.6466	0.0057	4.94%	29.76%
Euro in dollars	$1.2892	$1.3057	-0.0165	1.12%	-11.80%
Dollar in euros	€ 0.7757	€ 0.7659	0.0098	-1.11%	13.37%
Dollar in yen	95.61	95.28	0.33	-3.05%	-14.52%
Canadian dollar in U.S. dollars	$0.815	$0.814	$0.0011	-1.48%	-17.90%
U.S. dollar in Canadian dollars	$1.228	$1.228	-$0.0008	1.52%	21.81%
Commodities
Gold	$811.30	$820.50	-$9.20	12.96%	-3.19%
Copper	$1.6915	$1.6540	$0.04	-7.52%	-44.38%
Silver	$10.2690	$10.3050	-$0.04	5.54%	-31.17%
Corn	$3.5400	$3.5350	$0.00	-11.83%	-22.28%
Crude oil (NYMEX) (per barrel)	$54.44	$50.77	$3.67	-19.72%	-43.28%