Dow jumps 173 in volatile session

By Charley Blaine and Elizabeth Strott

Despite more crummy economic news, stocks enjoyed their seventh day of gains in the last eight sessions.

The rally came on a volatile day that saw the Dow Jones industrials twice show losses of more than 100 points before finishing up 173 points, or 2.1%, to 8,592.

The Standard & Poor's 500 Index was up 22 points, or 2.6%, to 871, and the Nasdaq Composite Index was up 43 points, or 2.9%, to 1,492.

With Tuesday's 270-point gain, the Dow has regained nearly two-thirds of Monday's 680-point loss. More important, the blue-chip index has gained 1,039 points, or nearly 13%, since closing at 7,552 on Nov. 20.

No less than money manager Bill Miller of Legg Mason suggested today that the market has bottomed.

Futures trading suggests U.S. stocks will open down slightly on Thursday.

As the market surged higher today, it overcame falling commodity prices that slammed energy and metals stocks as well as a darkening picture of the economy from the Federal Reserve's Beige Book report.

"Districts generally reported decreases in retail sales, and vehicle sales were down significantly in most districts," the report said. The Beige Report is a narrative picture of the economy based on information collected before Nov. 24.

Other economic problems were a report showing a drop in private employment, the largest layoff notices since 2002 and substantially reduced guidance from former Wall Street darlings Research In Motion (RIMM, news, msgs) and Freeport-McMoRan Copper & Gold (FCX, news, msgs).

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The rally came thanks to gains in financial, homebuilding, consumer and technology stocks. Citigroup (C, news, msgs), American Express (AXP, news, msgs) and Bank of America (BAC, news, msgs) were the Dow leaders; Citigroup was up 8.3% to $7.82.

Homebuilders moved higher on two developments:

• The Wall Street Journal said the Treasury Department is considering a plan to halt sliding home prices by using Fannie Mae (FNM, news, msgs) and Freddie Mac (FRE, news, msgs) to push mortgage rates on new loans to as low as 4.5%.

• Also, a new report showed a big jump in mortgage applications.

The reports set off a rally in homebuilding stocks, the market's strongest sector. The Philadelphia Housing Sector Index ($HGX.X) was up 6% to 81.63. Ryland (RYL, news, msgs) was up 10.8% to $17.69. Pulte Homes (PHM, news, msgs) jumped 13.4% to $11.14.

Those strengths offset weakness in energy and materials stocks.

Dow component Alcoa (AA, news, msgs) was down 4.8% to $9.29. Freeport-McMoRan Copper & Gold was off 17.3% to $18.05 after announcing it would suspend its dividend and slash output in the face of "dramatic" declines in metals prices. Freeport-McMoRan is one of the world's largest copper producers.

Alcoa was the worst performer among the 30 Dow stocks. Freeport-McMoRan was the worst S&P 500 performer.

Energy shares were lower as crude oil gave up early gains and was at $46.81 a barrel in New York, down 15 cents from Tuesday. Oil services giant Schlumberger (SLB, news, msgs) was down 3.2% to $42.53. After climbing 56% in 2007, the stock is down 59% this year.

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Retailers had a decent day. The Standard & Poor's Retail Index ($RLX.X) rose 6.3% to 262.90 after a report from comScore today said that so-called Cyber Monday online spending rose 15% from last year to $846 million. Amazon.com (AMZN, news, msgs) shares jumped 9.8% to $45.21 on the report. The gain put the stock in the top 25 among S&P 500 stocks.

Twenty-five of the 30 Dow stocks were higher today, along with 402 S&P 500 stocks and 83 stocks in the Nasdaq-100 Index($NDX.X). The Nasdaq-100 was up 36 points, or 3.2%, to 1,166.

A big question that will affect markets Thursday is whether the Bank of England and the European Central Bank will cut interest rates. Officials are at both institutions are to discuss the question on Thursday.

Earnings are due from homebuilder Toll Bros. (TOL, news, msgs), Smithfield Foods (SFD, news, msgs) and software maker Novell (NOVL, news, msgs).

Energy prices -- New York close

	Wed.	Tues.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$46.79	$46.96	-$0.17	-14.05%	-51.25%
Heating oil (per gallon)	$1.6083	$1.5832	$0.0251	-3.91%	-39.30%
Natural gas (per million BTU)	$6.3470	$6.4240	-$0.0770	-2.50%	-15.18%
Unleaded gasoline (per gallon)	$1.0415	$1.0583	-$0.0168	-9.13%	-58.19%

The UAW agrees to help Detroit

General Motors (GM, news, msgs) and Ford Motor (F, news, msgs) moved up 1% to $4.90 and 5.6% to $2.85, respectively, after the United Auto Workers said they will allow GM, Ford and Chrysler Group to delay payments into a massive health-care trust.

The UAW also will suspend the controversial jobs bank program for laid-off workers to help Detroit's struggling automakers secure emergency federal loans.

GM, Ford and privately held Chrysler hope to convince Congress to provide some $34 billion in bridge loans to prevent them from going under.

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GM said it needs $4 billion immediately to stay afloat through the end of the year. The company asked for a total of $18 billion in loans, $6 billion more than it had asked for a mere two weeks ago.

Chrysler asked for $7 billion in bridge loans, and Ford pleaded for a $9-billion line of credit to be used if needed. The company believes it can break even or even make a little money in 2011.

The requests follow dismal November sales figures from all automakers. GM's vehicle sales plunged 41%, Chrysler saw sales tank 47%, and Ford's sales fell nearly 31%.

A deteriorating jobs picture

A pair of jobs reports contributed to the gloomy picture this morning.

The ADP report on unemployment showed a loss of 250,000 private-sector jobs in November, down from a revised loss of 179,000 jobs in October. It was the biggest decline since November 2002, ADP said.

A separate report from Challenger, Gray & Christmas said that November job cuts jumped to 181,671, the biggest monthly decline since January 2002.

On Friday, the Labor Department will issue its November jobs report, and economists are preparing for thousands of job losses.

Meanwhile, the Institute of Supply Management's nonmanufacturing index, which offers a reading of the service industry, fell to a reading of 37.3 in November, far worse than the reading of 42 that economists had expected and further proof that the economy is sinking deeper into a recession.

It was the worst monthly reading in the history of the index -- and a big drop from October's unchanged reading of 44.4. Readings below 50 indicate contraction in the service sector, which makes up about 90% of the economy.

One upbeat economic note this morning: Productivity in the nonfarm sector rose at an annual rate of 1.3% in the third quarter, the Labor Department said in a revised report today. The revision was higher than the original 1.1% increase the department first reported.

Economists had expected a downward revision to an increase of 1% for the quarter.

Unit labor costs, an inflationary measure, rose at a revised 2.8% annual rate in the quarter -- below both the initial reading of a 3.6% increase and economists' forecast for a revised 3.1%.

Earlier this week, it was confirmed that the economy has officially been in a recession since December 2007.

RIM slashes its outlook

Research In Motion (RIMM, news, msgs) hurt stocks early after the BlackBerry maker surprised the Street with its ugly outlook for the third quarter.

The company said it expects revenue to be between $2.75 billion and $2.78 billion, 9% lower than the midpoint of analysts' expectations of between $2.77 billion and $3.1 billion.

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RIM also expects adjusted earnings to between 81 cents and 83 cents per share, far lower than a previous forecast of between 89 cents and 97 cents.

"Product launch timing, general economic conditions and foreign exchange volatility have tempered our results in the third quarter," Co-Chief Executive Jim Balsillie said in a statement.

The stock was up 4.4% to $38.96.

"In the U.S. and in most parts of the world, you've already seen very high penetration rates of mobile phones," James Faucette, an analyst at Pacific Crest Securities, told Bloomberg News. "People aren't giving up their mobile phones; they just aren't replacing them as frequently as they have in the past."

Mortgage applications jump

The number of Americans filing for mortgage applications soared 112% last week, on a seasonally adjusted basis, the Mortgage Bankers Association said in a weekly report.

Applications to refinance soared 203.3% last week, and mortgage applications to buy new homes rose a seasonally adjusted 38%.

Mortgage rates have been falling after the Federal Reserve decided to buy debt and mortgage-backed securities from Fannie Mae and Freddie Mac, the government-backed mortgage companies.

The rate for a 30-year fixed mortgage fell to 5.47% this week from 5.99% last week, the MBA said.

Warren Buffett fighting the French

The French company Eléctricité de France (ECIFF, news, msgs) is offering about $4.5 billion, or about $52 per share, for a 50% stake in Constellation Energy's (CEG, news, msgs) nuclear power business.

EDF's offer represents a 90% premium over a bid from MidAmerican Energy Holdings, which is controlled by Buffett's Berkshire Hathaway (BRK.A, news, msgs). Constellation shareholders are set to vote on the first bid in three weeks.

Constellation agreed to be sold to MidAmerican for $26.50 per share in September, after its shares plunged 58% in three days amid worries about how the market chaos would affect Constellation's energy trading business.

"The timing of the bid is worrying investors because of the current credit climate," Chicuong Dang, a Paris-based analyst at KBL Richelieu Gestion, told Bloomberg News. "EDF's offer is reasonably priced. Buffett's offer is really low. EDF has to be present in the U.S. market if it wants to be a world nuclear leader," Dang said.

EDF, which already owns about 9.5% of Constellation, said its offer includes an immediate $1 billion cash investment into the power company in exchange for preferred shares.

Shares of Constellation were up 10.1% to $27.70.

Bed, Bath & Beyond warns; U.S. Steel idles plants

The weakening economy has hit home furnishings retailer Bed Bath and Beyond (BBBY, news, msgs) and U.S. Steel (X, news, msgs), prompting both companies to deliver bad news late Tuesday.

Bed, Bath & Beyond said it expects earnings to fall between 31 cents and 35 cents per share, down from previous guidance of between 41 cents and 47 cents and well below analysts' estimates of 40 cents. Bed, Bath & Beyond earned 52 cents per share in the same quarter last year.

The stock was up 14.3% to $22.49.

U.S. Steel said it will temporarily idle three plants over the next few weeks in an effort to deal with falling prices and weakening demand. The moves will affect about 3,500 workers.

The company will idle Great Lakes Works, near Detroit; Keetac, in Keewatin, Minn.; and Granite City Works, near St. Louis.

Down as much as 7.5% in the morning, U.S. Steel finished up 0.5% to $26.41.

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	0.015%	0.050%	-0.035	-25.00%	-99.52%
5-year Treasury note yield	1.632%	1.672%	-0.040	-16.05%	-52.76%
10-year Treasury note yield	2.676%	2.693%	-0.017	-9.50%	-33.68%
30-year Treasury bond yield	3.184%	3.202%	-0.018	-8.69%	-28.59%
Currencies
U.S. Dollar Index	87.165	86.820	0.345	0.53%	13.65%
British pound in dollars	$1.4734	$1.4925	-0.0191	-4.23%	-25.93%
Dollar in British pounds	£0.6787	£0.6700	0.0087	4.42%	35.01%
Euro in dollars	$1.2650	$1.2723	-0.0072	-0.34%	-13.45%
Dollar in euros	€ 0.7905	€ 0.7860	0.0045	0.34%	15.54%
Dollar in yen	93.13	93.14	-0.01	-2.57%	-16.74%
Canadian dollar in U.S. dollars	$0.795	$0.801	-$0.0066	-1.66%	-19.98%
U.S. dollar in Canadian dollars	$1.259	$1.248	$0.0111	1.69%	24.97%
Commodities
Gold	$770.50	$783.30	-$12.80	-5.92%	-8.05%
Copper	$1.5545	$1.6005	-$0.05	-5.76%	-48.88%
Silver	$9.5900	$9.6150	-$0.03	-6.26%	-35.72%
Corn	$3.3200	$3.3250	-$0.01	-5.01%	-27.11%
Crude oil (NYMEX) (per barrel)	$46.79	$46.96	-$0.17	-14.05%	-51.25%