Major Indexes Jump on Spending, Auto Plans

News at a Glance

• Rally Continues: Stocks soar on hopes for economy, Detroit.
• Autos and the Beltway: Dodd, Dems plan $15 bln bailout.
• Gas Prices Slip: Lundberg Survey finds $1.75 a gallon.
• No Deal: M&A may dip 30% in '09: Barclays, Nomura.

The Lowdown

The rally is still rolling.

Stocks were sharply higher Monday as traders rode last week's momentum, embracing proposed federal spending under a new administration and the promise of government help for Detroit. By the close, the Dow Jones Industrial Average had risen 298 points to 8934. The Nasdaq had picked up 62 at 1571, and the S&P 500 had jumped 33 to 909.

Traders cheered President-elect Barack Obama's sweeping program to create new jobs through the creation and upkeep of national infrastructure. Details of the plan were released over the weekend, after the Labor Department said Friday the economy had forfeited more than half a million jobs in November. Obama cautioned that "things are going to get worse before they get better," but traders appeared more optimistic.

Also in Washington, by the close Congressional Democrats were still working on legislation to funnel $15 billion in emergency loans into the nation's top auto makers, The Washinton Post reported. White House press secretary Dana Perino said lawmakers were on the verge of deal, according to the Associated Press.

The bill, expected as early as Monday, is likely to come with some caveats that could rattle the brass in Detroit. General Motors (GM) Chief Executive Rick Wagoner's already-hot seat got a bit hotter Sunday, after Sen. Chris Dodd (D-Conn.) suggested he should leave the company if Washington provides the firm with federal aid, The Wall Street Journal reported.

"If you're going to restructure, you've got to bring in a new team to do this," Dodd said on the CBS talk show, "Face the Nation." "I think [Mr. Wagoner] has to move on."

Whether Wagoner stays or goes, the industry is likely to be relieved at the recent decline in gas prices. Fuel costs, which have been an albatross around the neck of the auto makers, are declining sharply. A gallon of gas now costs just a penny more than it did in March 2004, a remarkable turnaround after the price spike that helped catalyze Detroit's collapse. Meanwhile crude oil prices, which had been in freefall, rebounded to $44 a barrel.

Traders appeared to look past a prediction for weak corporate activity. Bankers at Barclays (BCS) and Nomura project a 30% decline in the value of mergers and acquisitions in 2009, Bloomberg reported. That would put the value of deals next year at about $2 trillion.

In Asian markets, Japan's Nikkei ended up 5.2%, while Hong Kong's Hang Seng picked up 8.9%. The major European indexes held substantial gains in afternoon trading.

Corporate News

• 3M (MMM), the diversified manufacturer and Dow component, plans to cut 1,800 jobs from its payrolls during the fourth quarter, Reuters reported, citing an article published Friday by the Minneapolis Star Tribune. The firm will also delay its "merit pay" and force employees to take vacation or unpaid time off before the end of the year.
• Toyota (TM) is considering as much as a 40% reduction in capital spending in its next fiscal year, which begins in April, CNBC reported, citing the Nikkan Kogyo newspaper. Toyota has lowered its global vehicle output as the auto industry struggles, particularly in the U.S.
• Apple (AAPL) was the fifth-busiest retail web site on the Monday after Thanksgiving, a benchmark day for online shopping known as "Cyber Monday," Fortune reported, citing comScore data. Apple's Black Friday discounts had expired by Monday, Dec. 1, but its site still drew more traffic on that day than that of Dell (DELL), Best Buy (BBY) and Circuit City (CC).

The Economy

• There are no major economic reports scheduled to be released Monday.

ReadMe

• BusinessWeek on health care: A national coverage plan could provide a broad economic stimulus. STORY
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• The Washington Post on holiday parties: The lights are little dimmer this year. STORY

WatchMe

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