NEW YORK – Investors nearing the end of a brutal 2008 made some modest bets Tuesday, sending stocks higher after taking some comfort in the government's decision to provide $5 billion to General Motors Corp.'s troubled financing arm.
The Treasury Department said late Monday it would provide the money to GMAC Financial Services LLC from the $700 billion bank rescue program. The Federal Reserve last week approved GMAC's application to become a bank holding company, a move that cleared the way for the company to receive money from the financial rescue fund.
The injection is on top of the $17.4 billion in loans the Bush Administration agreed to provide to the auto industry on Dec. 19. GMAC said Tuesday it would immediately resume lending to certain customers it had previously said were too great a risk for auto loans because of tight credit markets.
With many traders away for the holidays, stocks have shown small moves in light volume in recent sessions. Most investors are looking past 2008 for clues about how stocks will fare in the coming year. The major stock market indicators are down 36 percent to 43 percent for the year.
Subodh Kumar, global investment strategist at Subodh Kumar & Associates in Toronto, said the market's moves in the final days of the year are more noteworthy than some investors realize; stocks have been fairly steady despite low trading volume that could easily lead to sharp declines. But he predicts trading will remain volatile into mid-2009.
"It's still relatively encouraging that the markets have been able to hold up," he said.
Investors are also awaiting insights into the mood of consumers, whose reluctance to spend has further dented an already troubled economy. The holiday shopping season has been a dismal one for most retailers, a troubling development for Wall Street as consumer spending accounts for more than two-thirds of U.S. economic activity.
Wall Street expects the Conference Board's Consumer Confidence Index to edge up to 45 in December from 44.9 in November, according to economists surveyed by Thomson Reuters. The November reading was at about half the level seen a year earlier and was near the 43.2 last seen in December 1974, when the economy was grappling with a 16-month recession. The index, compiled from a survey of 5,000 U.S. households, is due at 10 a.m. EST.
In early trading, the Dow Jones industrial average rose 52.96, or 0.62 percent, to 8,536.89.
Broader indexes also moved higher. The Standard & Poor's 500 index rose 5.80, or 0.67 percent, to 875.22; while the Nasdaq composite index added 12.15, or 0.80 percent, to 1,522.47.
Bond prices fell, showing signs of easing demand for the safest investments. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.14 percent from 2.10 percent late Monday. The yield on the three-month T-bill, in great demand because it is considered one of the safest investments, rose to 0.07 percent from 0.03 percent late Monday.
The dollar was mixed against other major currencies, while gold prices fell.
GM owns 49 percent of GMAC, while private equity firm Cerberus Capital Management holds the remainder. Shares of the automaker rose 28 cents, or 7.8 percent, to $3.88.
The Russell 2000 index of smaller companies rose 5.05, or 1.08 percent, to 471.20.
Overseas, Japan's Nikkei stock average rose 1.28 percent in the final session of the year, ending 2008 with a loss of 42 percent. Markets in Japan are closed for a holiday Wednesday. In afternoon trading, Britain's FTSE 100 rose 1.14 percent, Germany's DAX index rose 2.24 percent, and France's CAC-40 rose 1.06 percent.