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Dow Gains 3.5% but Ends Below 9,000

Stocks advanced Monday, but ended off session highs, as hopes for an auto bailout and action by world governments helped offset the grim reality of a fresh wave of layoffs.

The Dow Jones Industrial Average rose 298.76, or 3.5 percent, to close at 8,934.18, after earlier topping 9,000. The S&P 500 index gained 3.9 percent, closing at 909.70. The Nasdaq rallied 4.1 percent to close at 1571.74.

The move higher continues Friday's rally, when stocks shot up in the final hour of trading and the Dow gained 260 points, or 3.1 percent.

And, today's gains put all three major indexes in positive territory for the month.

Traders said Friday was a turning point for this market: If stocks could shake off a loss of more than half a million jobsin one month, then much of this slump is already priced into the market.

"The market is basically shrugging off a lot of this bad news coming out," Matt Zeman, a trader at LaSalle Futures Group, said on CNBC this morning, adding that many people have largely discounted the next two quarters. "We could see a very powerful rally taking us higher in the short term."

Asian markets surged, with the Nikkei closing more than 5 percent higher, while European stocks were also soaring in morning trading.

General Motors was the top gainer on the Dow after the White House and several lawmakers said a bailout deal is "very likely" today, though the White House, right around the time of the closing bell, said it had concerns about the Democratic draft of the bailout.

The plan, likely to be in the $15 billion range, is expected to include a Cabinet-level oversight board and a provision that the government could take the money back if the auto companies aren't taking sufficient steps to change the way they operate. The rescue funds would come from an existing loan program originally tageted at helping build fuel-efficient vehicles.

As the prospect of a deal grew closer, GM CEO Rick Wagoner came under pressure to resign.

Ford shares rose more 24 percent, while GM soared 21 percent.

The Swedish government is expected to offer loans and loan guarantees worth several billion Swedish crowns to Volvo Cars, owned by Ford, and Saab Automobile, owned by GM, a local newspaper reported, citing an unidentified source.

McDonald's reported its global same-store sales jumped 7.7 percent in November, fueled by strong growth overseas, as well as solid growth in the U.S., where cash-strapped consumers are choosing fast-food chains over more expensive restaurants. Still, shares fell 2.9 percent.

Apple shares rose 6.1 percent following news that Wal-Martwill start selling Apple's popular iPhone later this month. The buzz on the Web is that Apple will offer a 4-gigabyte model for $99, which would hold about 1,000 songs, but sources tell CNBC that the $99 price point isn't true. Shares of Wal-Mart shed 1.1 percent.

Today brought a fresh wave of layoffs.

Dow component 3M was the biggest drag on the Dow, falling 4.1 percent, after the conglomerate confirmed plans to slash 1,800 positionsfrom its payrolls and lowered its 2009 outlook.

Dow Chemical announced plans to close several facilities and cut 5,000 jobs, or 11 percent of its work force. This comes less than a week after rival DuPont announced cutbacks.

Shares of Dow Chemical rose 7.2 percent, while DuPont gained 9.2 percent.

And, Swiss bank UBS , the world's largest wealth manager in terms of assets, may cut as many as 4,500 jobs, Swiss media are reporting. American depositary shares of UBS advanced 9 percent.

Infrastructure stocks advanced after President-elect Obama began outlining his economic-recovery plan this weekend, announcing plans to create at least 2.5 million new jobs in the next few years and the largest U.S. infrastructure investment since the 1950s.

Caterpillar jumped 11 percent. Aecom Technology , which has doubled in the past month or so, gained 11 percent, and Jacobs Engineering added 15 percent.

Metals stocks were also higher: Alcoa was the second biggest gainer on the Dow behind GM, up more than 18 percent. U.S. Steel and Freeport-Mcmoran were up 24 percent and 19 percent, respectively.

On Sunday, Obama said he would put strong financial regulation at the center of his economic recovery program to force more accountability in the banking industry.

Layoffs are expected to continue in the financial sector, draining millions of tax dollars from states' coffers and swelling the ranks of the unemployed.

Meanwhile, Merrill Lynch Chief Executive John Thain has suggested to directors that he get a 2008 bonus of as much as $10 million, because, by merging with Bank of America, he helped avert what could have been a much larger crisis at the investment bank, according to the Wall Street Journal. Both stocks were up about 17 percent.

Genworth Financial was one of the top boosts to the S&P 500, rising 42 percent, after a group working for state regulators agreed to lower capital-reserve requirements for insurers, according to a report in the Wall Street Journal.

Other insurers ended, with Hartford Financial gainine 1.9 percent and Prudential falling 1.3 percent.

MetLife lost 2.4 percent after the firm said it's going to miss Wall Street's target in the fourth quarter but said it has a strong capital position and expects to grow faster than rival insurers.

Barack Obama wasn't the only one hammering out stimulus measures: European leaders met with business leaders in London ahead of an EU summit later this week, where they will discuss a 200 billion euro ($250 billion) spending plan. And Chinese leaders gathered for a three-day conference to create a new stimulus planto keep annual growth at 8 percent or higher, the official Xinhua news agency reported.

In the aerospace sector, JP Morgan Securities cut its price target of Dow component Boeing to $42 from $46 on concerns over the further delay of the 787 Dreamliner and damage from a two-month machinists strike. Shares of Boeing rose 8.4 percent.

The gloomy outlook also caused JP Morgan to cut targets for two of Boeing's suppliers, Precision Castparts and Rockwell Collins, though both stocks advanced.

In a sign the financial crisis is spreading to the media sector, publisher and broadcaster Tribune has filed for Chapter 11 bankruptcy protection.

The New York Times is planning to borrow $225 million against its mid-Manhattan headquarters building, to ease a potential cash-flow squeeze, the New York Times reported on its Web site.

Elsewhere in media land, Christie Heffner said she will resign as chairman and CEO of Playboy Enterprises, where shares have plunged 82 percent in the past year. Shares rose 22 percent.

This Week:

TUESDAY: Pending-home sales; House hearing on collapse of Fannie, Freddie; Earnings from Best Buy, Goldman, Adobe and Hovnanian
WEDNESDAY: Weekly mortgage applications; wholesale trade; weekly crude inventories; House hearing on TARP; Treasury budget; Earnings from Morgan Stanley, Nike
THURSDAY: Two-day European economic summit begins; Import/export prices; trade deficit; weekly jobless claims; weekly natural gas inventories; Fed's Stern speaks; Earnings from Costco, FedEx, Rite Aid, Oracle, Palm and RIM
FRIDAY: PPI; retail sales; consumer sentiment; business inventories

Send comments to cindy.perman@nbcuni.com.