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Wall Street jumps on Obama stimulus plan

(Agencies)
Updated: 2008-12-09 08:34

NEW YORK – A stock market gaining in confidence shot higher for a second straight session Monday as US investors bet that President-elect Barack Obama's plans to increase spending on public works projects will help lift the economy back to health.

The major market indexes jumped more than 3 percent, and the Dow Jones industrials' nearly 300-point advance gave the blue chips their highest close in a month.

A trader raises his hand to bid on stock prices as he works on the main trading floor of the New York Stock Exchange early in the trading session, December 8, 2008. [Agencies]

The rally, which gave the Dow a two-day gain of almost 560 points, extended a period of relative tranquility on Wall Street. The Dow and the Standard & Poor's 500 have risen in nine out of 11 sessions as investors have absorbed bad economic news without signs of the panic that rocked the market for much of the fall.

Obama's plan calls for the largest US public works program since the creation of the interstate highway system a half-century ago. That could bolster the US economy by putting thousands of people to work building schools and other construction projects.

His weekend announcement gave a lift to a range of companies, from machinery makers to materials producers. Alcoa Inc., the world's third-largest aluminum producer, surged 18 percent on the news; while heavy-equipment maker Caterpillar Inc. jumped 11 percent.

Investors also grew more confident as the government neared a deal to dole out billions to America's three biggest automakers. The White House said during Monday's trading that it was "very likely" to strike an agreement with Congress on funneling money to General Motors Corp., Chrysler LLC and Ford Motor Co. The package was expected to total about $15 billion.

The US stock market has become more optimistic although a number of reports last week seemed to indicate the recession is showing no signs of weakening.

As the week progressed, the market appeared to be taking the bad news in stride -- even Friday's US Labor Department report that showed the nation lost more than a half million jobs last month. The report raised hopes that the government would take more steps to stimulate the economy.

"I think people recognize that the government is going to throw everything that they can at this market, everything they can at the economy to make it work," said James Cox, managing partner at Harris Financial Group. "We had bad jobs numbers on Friday. To be able to overcome those type of job losses and have that kind of rally, that is technically significant. If that doesn't make you bullish, I don't know what does."

Still, many analysts, cognizant of the fact that recoveries from bear markets tend to be tumultuous, were still cautious despite the market's recent string of gains.

"My gut feeling is investors aren't going to quite believe this rally and there is probably going to be some profit-taking," said Tobias Levkovich, chief US equity strategist at Citigroup Inc. "There are a lot of different balls bouncing in the air right now. You still have a pretty jittery investor base out there."

The Dow rose 298.76, or 3.46 percent, to 8,934.18, its highest close since it finished at 8,943.81 on Nov. 7. The blue-chip index, which added 259 points on Friday, is now up for December.

Broader indexes also rose. The Standard & Poor's 500 index advanced 33.63, or 3.84 percent, to 909.70; and the Nasdaq composite index jumped 62.43, or 4.14 percent, to 1,571.74.

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