Stocks Rise Amid Hope For Automaker Rescue

Wall Street has set aside fears about a collapse of the U.S. auto industry, and closed higher in another sign that it's able to absorb troubling news.

The market recovered from the heavy selling at the start of the session following the Treasury Department's announcement it is prepared to funnel cash to the nation's Big Three automakers.

Wall Street has in recent weeks managed to react coolly to troubling economic and corporate news, and Friday was another instance of its resilience.

The Dow Jones industrials are ending up 64, or 0.75 percent, at 8,629. The tech-heavy Nasdaq composite index is ending with steeper gains.

General Motors Corp. and Chrysler LLC have said they could run out of cash within weeks without government help. Ford Motor Co., which would also be eligible for aid under the bill, has said it has enough cash to make it through next year.

The Treasury Department said it stands ready to "prevent an imminent failure" of the auto companies.

Other economic news gave investors pause. On Friday, the Commerce Department reported retail sales dropped by 1.8 percent last month, the fifth straight monthly drop. The weakness was led by a 2.8 percent fall in auto sales.

The Labor Department reported that wholesale prices dropped by 2.2 percent in November, marking the fourth straight monthly decline, reflecting weakness in prices for gasoline and other energy products.

Falling prices are giving consumers relief; however, a prolonged, widespread decline runs the risk of serious economic damage.

U.S. businesses also cut their inventories by the largest amount in five years, the government said Friday, a sign the recession will force further cuts in production.

The bankruptcy of any of the big American automakers would deal another blow to the world's largest economy, which is sliding deeper and deeper into recession.

Investors' concerns about job losses was further fueled by news late Thursday that Bank of America expected to cut as many as 35,000 jobs over the next three years, including some from investment bank Merrill Lynch & Co., which it agreed to buy in September.

The effect was felt overseas as Asian markets plunged Friday.

Japan's Nikkei 225 stock average tumbled 484.68 points, or 5.6 percent, to 8,235.87, and Hong Kong's Hang Seng index slid 5.9 percent to 14,692.79. South Korea's Kospi fell 4.4 percent.

The dollar sank to a 13-year low against the yen, dropping as low as 88.16 yen, and oil fell below $46 a barrel.

Bond prices were mixed Friday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.51 percent from 2.63 percent late Thursday. The yield on the three-month T-bill was unchanged from late Thursday at 0.02 percent. The bill has been in great demand because of the safety it offers investors.

The dollar rose against other major currencies, while gold prices fell.

Light, sweet crude fell $2.58 to $45.40 in electronic premarket trading on the New York Mercantile Exchange.

News about the rejected auto bailout sent the dollar as low as 88.16 yen - its lowest level since Aug. 2, 1995 - before it recovered some to 89.70 yen. That heaps more bad news on major exporters like Toyota and Sony, already reeling from waning global consumer demand.

Auto stocks from Bangkok to Tokyo plummeted. In Tokyo, Toyota Motor Co. dived 10.6 percent and Honda Motor Co. slid 12.9 percent. South Korea's Hyundai Motor Co. shed 9.3 percent and Kia Motors Corp. was off 9.1 percent. Thailand's AAPICO Hitech, an auto parts maker, fell 4.2 percent.

In a special three-part report for the CBS Evening News, correspondents John Blackstone in San Francisco, Celia Hatton in Beijing and Richard Roth in England reported on the international ripple effect of decreased U.S. retail demand.
When parents in California buy fewer toys, the Chinese factories which manufacture those toys - and the boxes they're sold in - close up. When the Chinese manufacture less boxes they need less raw material, and that means recycling companies in Britain are getting far less money for the "commodity" of their waste paper.