NEW YORK (AP) -- Wall Street rebounded Tuesday, regaining some of the ground lost in the previous session's huge drop, as the potential for a bailout of the beleaguered auto industry helped calm investors. The Dow Jones industrials rose more than 225 points, regaining a third of Monday's nearly 680-point plunge.
Investors, already cautiously returning to the market following Monday's steep decline, received some reassuring words from Ford CEO Alan Mulally, who said his company has enough cash to make it through 2009 and may not need government help. Mulally's comments, in an interview with The Associated Press, came as Ford, General Motors Corp. and Chrysler LLC returned to Washington to submit to Congress plans for remaking themselves; lawmakers demanded those plans before considering whether to give the automakers $25 billion in government support.
Analysts said investors found the prospect of a bailout heartening, but that stocks were also rising because of the market's now-familiar pattern of bouncing higher after a steep drop.
"It looks like the automakers are closer to a bailout, but it is hard to attribute these kind of market moves to news events," said Brian Gendreau, investment strategist for ING Investment Management. "You can speculate to death what drives the markets, but this market is going to be full of volatility."
The market's decline on Monday ended a five-day rally - the first such winning streak for the Dow and the S&P 500 since July 2007. Investors sold stocks lower Monday amid lackluster Thanksgiving weekend retail sales and an official confirmation that the country is in recession.
"We had one of the biggest drops in history on Monday, and right now we're dealing with a bounce from that sell-off," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research. "A bear market bounce is very volatile, very sharp upturns. That's how they happen, they're quick and they're short."
Investors got an additional boost after the Federal Reserve said it will extend the life of key programs aimed at loosening the credit markets and restoring stability to the financial sector.
The Fed says the programs, originally slated to last through Jan. 30, will be extended through April 30. The Fed's emergency lending facility for investment firms is covered by the decision.
The decision helped placate investors concerned that the government's recent efforts to unfreeze the credit markets haven't been enough to encourage banks to resume normal lending practices.
But investors remained wary as the automakers released their November sales figures Tuesday. Ford said its sales tumbled 31 percent amid a continued slump in consumer spending and tight credit markets. Toyota's sales fell 34 percent despite its extension of zero-percent financing on a dozen vehicles.
There were more signs of trouble for retailers, too, which is worrisome for a market already concerned that consumers won't be able to spend enough to boost the sagging economy. Sears Holdings Corp., battered by hefty charges and weak results at its U.S. department stores and Kmart locations, reported that it swung to a loss in the quarter. The company has previously said it will close eight more underperforming stores this year.
In early afternoon trading, the Dow Jones industrial average rose 227.87, or 2.80 percent, to 8,376.96. Standard & Poor's 500 index rose 27.58, or 3.38 percent, to 843.79, while the Nasdaq composite index gained 45.88, or 3.28 percent, to 1,443.95.
The Russell 2000 index of smaller companies rose 18.05, or 4.33 percent, to 435.12.
Advancing issues outnumbered decliners by about 4 to 1 on the New York Stock Exchange, where volume came to 662.30 million shares.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.71 percent from 2.76 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.05 percent from 0.03 percent late Monday.
The volatility that has plagued the stock market in recent months is typical of periods marked by low economic growth, analysts said. Some, however, are concerned that investors may have gotten carried away during the most recent rally.
Detrick of Schaeffer's Investment Research said there still might be too much optimism in the market, considering the five-straight days of advances prior to Monday's drop. He said there was too much excitement on the part of investors that a bottom might have formed, and that sets the market up for disappointments.
"There's too much talk of valuations, people jumping in on the bullish side after a bounce," he said. "And that's not how bottoms form, and that's not going to take this market continually higher."
There was further evidence Tuesday that the housing sector remains under pressure. Homebuilder Beazer Homes USA Inc. said its fiscal fourth-quarter losses more than tripled as revenue plunged. The company said demand for new homes continues to be hurt by low consumer confidence, falling prices, extensive supply and less access to financing.
Beazer shed 25 cents, or 17 percent, to $1.25.
Most financial stocks bounced back Tuesday, with the exception of Goldman Sachs Group Inc. Concerns that the firm's exposure to the volatile stock markets has led several analysts to forecast a steep loss for the company's fiscal fourth quarter.
On Tuesday, UBS analysts predicted Goldman will lose $5.50 per share for the quarter ended Nov. 30, compared with a previous estimate for a loss of 40 cents per share. The UBS adjustment comes a day after a Credit Suisse analyst predicted the bank will lose $4 per share. Just a month ago, analysts were projecting Goldman would post a profit, according to a poll by Thomson Reuters.
Meanwhile, General Electric Co. said it expects fourth-quarter earnings to be near the low end of its previous guidance. However, the company said it still expects to pay a dividend of $1.24 per share in 2009.
GE rose $1.51, or 9.7 percent, to $17.01.
Shares of automakers jumped on the prospect for a bailout. Ford gained 25 cents, or 9.8 percent, to $2.80, while General Motors rose 23 cents, or 5 percent, to $4.82.
The dollar fell against other major currencies. Gold prices rose.
Light, sweet crude fell 13 cents to $49.15 a barrel on the New York Mercantile Exchange.
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