Stocks bounced back after a two-day selloff as traders shrugged off a bigger job loss than expected. However, a larger-than-expected loss from General Motors clipped some of the Dow's gains.
During an afternoon press conference with President-Elect Barack Obama, the Dow Jones Industrial Average shaved another 100 points off its gain.
U.S. employers cut 240,000 jobs from nonfarm payrollsin October, much more than the 200,000 expected. The unemployment rate jumped to 6.5 percent, the highest in more than 14 years. Economists had expected 6.3 percent.
September and August were also revised staggeringly higher: September was revised to a 284,000 decline from the initial estimate of 159,000, and August was revised to show a 127,000 drop. So far this year, a staggering 1.2 million jobs have disappeared — and half of that was in the past three months.
The report was a dismal indication of the economic situation but a lot of that was priced in during the selloff of the past two days, when the Dow lost 10 percent and logged its biggest two-day point loss on record. And, some market pros said the selloff was probably overdone. One predicted a six-day rally for the S&P 500.
"Treasuries were priced for Armageddon and we didn't get Armageddon," Kevin Flanagan, a fixed income strategist at Morgan Stanley, told Reuters. "There is no doubt we are seeing deteriorating labor market conditions, but for those expecting down 300,000 the report didn't quite measure up today."
Meanwhile, U.S. wholesale inventories dropped for the first time in 11 months, falling 0.1 percent in September. Economists had expected an increase of 0.3 percent. While encouraging, economists said it wasn't enough to keep pace with sliding sales. Wholesale sales fell 1.5 percent, the third straight decline.
General Motors shares declined more than 10 percent, making it the biggest drag on the Dow, after the stock resumed trading. Shares had been halted pending the auto maker's earnings report.
GM reported a net loss of $2.5 billion or $4.45 a share for the third quarter. Excluding items, GM lost $4.2 billion, or $7.35 a share, double of what analysts had expected. The quarter included hefty charges related to the elimination of retiree health-care coverage and Delphi bankruptcy proceedings, as well as its investment in GMAC. Revenue fell 13 percent to $37.9 billion. The auto maker's cash burn rate was a whopping $6.9 billion, more than double of what it spent in the second quarter.
"The third quarter was especially challenging for the auto industry. Consumer spending, which represents close to 70 percent of the U.S. economy, fell dramatically, and the abrupt closure of credit markets created a downward spiralin vehicle sales," GM CEO Rick Wagoner said in a press release. "The U.S. government's actions to help stabilize the credit markets and eventually ease the credit crunch are an essential first step to the economy's and the auto industry's recovery, but further strong action is required."
Ford Motor shares rose after the auto maker reported a wider-than-expected loss of $1.31 a share and said it would reduce salary expenses by another 10 percent in addition to other cost cuts.
Shares in Toyota Motor rebounded from Thursday's 16-percent decline after the Japanese auto maker shocked investors with a warning that profit this year would hit a 13-year low.
Qualcomm was one of the day's biggest advancers after the company, which makes cell-phone chips, gave a weaker-than-expected outlook Thursday after the bell, underscoring a slowdown in mobile-phone sales.
Sprint Nextel , the No. 3 U.S. mobile service, posted a quarterly loss and weaker revenue as customers fled to rival services.
Sprint reported a net loss of $326 million, or 11 cents a share, compared with a profit of $64 million, or 2 cents per share, in the year-ago quarter.
Microsoft dismissed speculation it might still be interested in a takeover of Internet firm Yahoo .
Asian stocks closed mixed, recouping heavy losses earlier in the day, while European stocks were higher.