The auto industry bailout will drive the market again Thursday as lawmakers haggle over the details of a temporary rescue plan for the big three.
The stock market has had its ups and downs as the auto bailout has lurched forward. Republicans Wednesday put the rescue in doubt as they revolted against an agreement worked out between Congressional Democrats and the White House.
"What I've been calling this is TARP 2," said Tim Smalls of Execution LLC. "There's a lot of gaming going on. There's a lot of posturing."
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"Let's face it. They're going to come up with something for the auto companies. They have no choice," he said.
But even with Wednesday's headlines coming from Washington, the stock market finished higher. Smalls said the market's behavior is part of a trend that started in the last couple of sessions. "This is the first time we've seen the market shake off bad news and trade higher," he said. "I think we're moving forward and we're trying to break the downtrend. Don't look now, but we've got this Santa Claus rally going through."
On Thursday, weekly jobless claims data is reported at 8:30 a.m. International trade and import and export prices are also reported at 8:30 a.m.
Costco reports earnings before the bell. Also reporting are Ciena and Lululemon Athletica.
Leaders of the European Union start a two-day meeting Thursday in Brussels on the credit crises and their plans for stimulus measures. Climate change is also on the agenda.
Smalls said he thinks the S&P 500 has the chance to push through the important 930 level sometime next week if the auto bailout is decided.
The Dow rose 70 points, up 0.81 percent to 8761.42. The S&P was up 10.57 points or 1.19 percent to 899.24. The Nasdaq finished up 18 or 1.2 percent, at 1565. The best performers in Wednesday's market were energy stocks, up 4.7 percent. Oil rose $1.45 per barrel to $43.52 on supply concerns.
The dollar Wednesday fell 0.76 percent against the euro and rose 0.56 percent against the yen .
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Treasury yields recovered somewhat Wednesday as the government sold more debt. There was an auction of $28 billion in three-year notes, with a yield of 1.245 percent. The three-month T-bill yield was at 0.02 percent, and the one-month was at 0.04 percent. On Tuesday, investors snapped up four-week T-bills at the Treasury's auction with a shocking yield of zero percent.
CNBC's Steve Liesman reported Wednesday on an important trend in the mortgage market. He said that some of the lowest 30-year fixed rates ever are now being offered by major banks. On Wednesday, there were offers at 5-1/8 to 5-1/4 for 30 years. The low on record was 5.21 percent in June, 2003.
"That's been a steady story, and that's because mortgage spreads have come in," said Greg Peters, Morgan Stanley credit analyst "Effectively, the Treasury program/Fed program is doing what it intended to do. That's important. I think there is positive news on the horizon here already in the system. I just think it takes time to play out and the mortgage piece is an important piece of it."
Peters said the t-bills trade shows that investors want cash going into year end. "What you're seeing is investment in Treasuries and you're seeing it in stocks. Those are the two most liquid markets," he said. He described the move up in equities as fragile and not necessarily believable. "Credit has been very tame relative so the question we're getting time and time again is how can stocks rally when credit is s not rallying...My take on it is it's just liquidity," he said.
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