New Year's arrives early: Dow up 184

By Charley Blaine and Elizabeth Strott

Wall Street had a nice party today as stocks opened higher, kept climbing and finished with their biggest gains in two weeks.

The gains were welcome as the U.S. stock market heads toward the finish of its worst year since 1931.

The Dow Jones Industrial Average was up 184 points, or 2.2%, to 8,668. The Nasdaq Composite Index had added 40 points, or 2.7%, to 1,551, and the Standard & Poor's 500 Index had gained 21 points, 2.4%, to 891.

The rally more than offset Monday's modest losses and was the third gain for the major indexes in the last four sessions.

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The market has been relatively stable in December.

The Dow is down 1.8%, with the S&P 500 down 0.6% and the Nasdaq up 1%. The Dow fell nearly 24% in September, October and November, and only two of the 30 Dow stocks are showing gains for the year: Wal-Mart Stores (WMT, news, msgs), up 15.8%, and McDonald's (MCD, news, msgs), up 4.8%.

Markets will be open for a full day of trading Wednesday and then will be closed for New Year's on Thursday.

The rally was started by news of the government's $6 billion rescue of GMAC, the financing arm of General Motors (GM, news, msgs), whose shares were up 5.6% to $3.80.

But it got a boost from lower energy prices and strength in such key tech stocks as Qualcomm (QCOM, news, msgs), Oracle (ORCL, news, msgs), Intel (INTC, news, msgs), Google (GOOG, news, msgs) and Microsoft (MSFT, news, msgs). (Microsoft is the publisher of MSN Money.)

The Nasdaq-100 Index ($NDX.X), which tracks the largest Nasdaq stocks, was up 28 points, or 2.4%, to 1,201.

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In addition, metals stocks were higher, with Alcoa (AA, news, msgs) the leader among the 30 Dow stocks, up 9.9% to $10.69.

Apple (AAPL, news, msgs) was a laggard in the rally after the technology site Gizmondo reported a rumor that CEO Steve Jobs was ill. Apple declined to comment. The stock was off 0.4% to $86.29. The stock has fallen more than 56% this year.

CNBC's Jim Goldman, however, said sources told him that Jobs' health was not a problem.

Energy prices -- New York close

	Tues.	Mon.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$39.03	$40.02	-$0.99	-28.31%	-59.34%
Heating oil (per gallon)	$1.2880	$1.2853	$0.0027	-23.04%	-51.39%
Natural gas (per million BTU)	$5.8590	$6.1360	-$0.2770	-10.00%	-21.70%
Unleaded gasoline (per gallon)	$0.8853	$0.8745	$0.0108	-22.76%	-64.46%

GMAC to get $6 billion rescue

The Treasury Department late Monday said it will provide $5 billion in bailout funds to GMAC, which provides financing for auto buyers and dealers. The Treasury Department said it will lend up to $1 billion to GM so the automaker can help GMAC finance its conversion to a bank holding company.

GMAC will pay an 8% dividend on the Treasury's $5 billion of senior preferred equity. GMAC will also issue warrants in the form of additional preferred equity that will equal 5% of the preferred-stock purchase and pay a 9% dividend if exercised.

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The funds will come from the Troubled Asset Relief Program.

GMAC "intends to act quickly to resume automotive lending to a broader spectrum of customers," the company said in a statement.

Chrysler's parent, Cerberus Capital Management, owns 51% of GMAC.

Earlier this month, the Bush administration announced a $17.4 billion bailout of the auto industry. GM and Chrysler expect to receive $4 billion each to help them get through the beginning of next year.

Shares of GM rival Ford Motor (F, news, msgs) were up 3.2% to $2.29.

Consumer confidence is still weak

Today's rally came despite another report showing that consumers were still unhappy with the economy in December.

The Conference Board's index on consumer confidence fell to a reading of 38 in December, an all-time low, down from a reading of 44.9 in November. Economists had predicted a reading of 45.2 for the current month.

"The further erosion of the consumer confidence index reflects the rapid and steep deterioration of economic conditions that occurred in the fourth quarter of 2008," Lynn Franco, director of the Conference Board's Consumer Research Center, said in a statement. "The overall economic outlook remains quite dismal for the first half of 2009, and only a modest recovery is expected in the second half."

The index's previous record low was 38.3 in October.

Consumers were weighed down by the bleak employment situation in December.

The number of Americans filing for first-time unemployment benefits rose to a 26-year high for the week ended Dec. 20, and the economy has shed nearly 2 million jobs this year.

Demand for oil trumps Mideast tensions

Crude oil fell 99 cents to $39.03 a barrel today after rising to $40.02 on Monday on worries about the attacks by Israel on the Gaza Strip.

"The strikes by Israel have heightened tensions in the region, increasing the geopolitical risk premium in the price on fears that there could be some disruption to crude supplies from the Middle East," Michael Davies, an analyst at Sucden Financial, wrote in a note to clients Monday.

But another analyst was more skeptical that a jump in prices would stick. "With most global economies struggling and credit markets still in an impaired state, it is hard to get too excited about the upside potential in energy markets attributable solely to geopolitical factors," Edward Meir, an analyst at MF Global, wrote in a note this morning.

Home prices continue to sink

The S&P/Case-Shiller 20-city index of home prices fell 2.2% in October from September. On a year-over-year basis, home prices are down 18%.

The 10-city index fell 3.6% in October from the previous month and 19% from October 2007.

"The bear market continues; home prices are back to their March 2004 levels," said David M. Blitzer, chairman of S&P's index committee.

Home prices in Phoenix tumbled 32.7% from October 2007, and Las Vegas home prices have fallen 31.7% over the past year.

Prices slumped 31% in San Francisco, and Miami, Los Angeles and San Diego recorded year-over-year declines of 29%, 27.9% and 26.7%, respectively.

Post-holiday retail outlook is grim

Worried consumers weren't out shopping this holiday shopping season -- that's for sure.

The economic slowdown could force up to 73,000 stores to close in the first six months of 2009, according to the International Council of Shopping Centers.

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Another analyst expects an even higher number of stores to close next year.

Approximately 200,000 stores will close in 2009, according to Burt Flickinger III, a managing director of consulting firm Strategic Resource Group. That would be the biggest contraction in the retail sector in 35 years.

The shopping center council predicts that 148,000 stores will close by the end of this year.

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"You are going to see a substantial retrenchment in the retail industry," said Rick Chesley, partner in the global bankruptcy and restructuring group at international law firm Paul Hastings, told The Associated Press. "The downturn has been catastrophic."

Bankruptcies could end up being good for the overall sector, Flickinger told Bloomberg News, "because we'll rationalize out all the redundant retailers and retail space in shopping centers."

Despite all the gloom about retailers, the Standard & Poor's Retail Index($RLX.X) was up 2.3% to 275. Ironically, the only Dow losers today were Wal-Mart and Home Depot (HD, news, msgs), down 0.1% to $55.05 and 1.1% to $23.11, respectively.

Dow Chemical to tap bridge loan?

Dow Chemical (DOW, news, msgs) could use a $13 billion bridge loan to fund its purchase of Rohm & Haas (ROH, news, msgs), the Financial Times reported.

But the banks lending the money could pressure Dow to lower its offering price for Rohm & Haas, the report said. Dow announced plans to buy Rohm & Haas in July for $78 per share.

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Dow took another hit late Monday, when ratings company Moody's Investors Service lowered the company's senior unsecured ratings to "Baa1" from "A3."

Moody's made the downgrade after Kuwait scrapped plans for a $17.4 billion joint venture with Dow Chemical, the proceeds of which were going to be used to finance Dow's purchase of Rohm & Haas.

Kuwait backed out of the deal Monday because it was "very risky" in light of the global economic turmoil and sinking oil prices.

Moody's said it is considering downgrading Rohm & Haas' rating of "Baa1" as well.

Standard & Poor's also cut Dow's credit rating late Monday, to "BBB" from "A-."

Dow Chemical shares were up 1.5% to $15.55; the stock had plunged 17.2% on Monday. Rohm & Haas shares jumped 11.9% to $59.70 after losing 16.1% in trading Monday.

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	0.090%	0.010%	0.080	350.00%	-97.13%
5-year Treasury note yield	1.463%	1.454%	0.009	-24.74%	-57.66%
10-year Treasury note yield	2.087%	2.096%	-0.009	-29.42%	-48.28%
30-year Treasury bond yield	2.583%	2.625%	-0.042	-25.92%	-42.07%
Currencies
U.S. Dollar Index	81.730	81.525	0.205	-5.74%	6.56%
British pound in dollars	$1.4422	$1.4422	0.0000	-6.26%	-27.50%
Dollar in British pounds	£0.6934	£0.6934	0.0000	6.68%	37.94%
Euro in dollars	$1.4098	$1.3963	0.0136	11.07%	-3.54%
Dollar in euros	€ 0.7093	€ 0.7162	-0.0069	-9.96%	3.67%
Dollar in yen	90.23	90.66	-0.43	-5.61%	-19.33%
Canadian dollar in U.S. dollars	$0.818	$0.818	-$0.0008	1.20%	-17.65%
U.S. dollar in Canadian dollars	$1.224	$1.222	$0.0022	-1.18%	21.46%
Commodities
Gold	$870.00	$875.30	-$5.30	6.23%	3.82%
Copper	$1.3205	$1.3115	$0.01	-19.95%	-56.58%
Silver	$10.9800	$10.8100	$0.17	7.33%	-26.41%
Corn	$3.9625	$3.9350	$0.03	13.38%	-13.01%
Crude oil (NYMEX) (per barrel)	$39.03	$40.02	-$0.99	-28.31%	-59.34%