Stocks rebounded Tuesday as investors cheered the bailout of General Motors' finance arm.
The Bush administration expanded its bailout of the auto industry, buying $5 billion in equity in auto and mortgage finance company GMAC and increasing a loan to General Motors by $1 billion.
Meanwhile, billionaire investor Kirk Kerkorian sold his remaining stake in Ford Motor after betting more than $1 billion that the carmaker will recover.
In late October, Kerkorian's investment firm Tracinda began selling Ford shares at $2.43, representing a loss of almost 66 percent from what the fund paid on average.
Shares of GM jumped 10 percent at the open, while Ford gained more than 3 percent.
Investors are still holding out to see if we get a Santa Claus rally this week, with only two trading days left in the year. But some traders said — don't hold your breath.
"I think it's going to be tough in these two days. I think people may be saving up to see if we can get into that Obama honeymoon rally," Art Cashin, director of floor operations at UBS, told CNBC.
Analysts expect this year to be the worst year for stocks since 1931, with most stocks down 40 percent for the year. And, while there had been some predictions for a recovery next year, many analysts say now we won't see the economy get back on track until 2010.
"I think we're going to see two '09's," Cashin said. "The first half of the year may be filled with a good deal more hope," given the Obama boost, he said. "The back half of the year may be filled with a hangover."
Many analysts are predicting the reverse, a sluggish first half and rally in the second half.
In more mergers and acquisitions news, Dow Chemical is scrambling to keep its $15 billion takeover of rival Rohm & Haas alive after a surprise decision by the Kuwaiti government to scrap a joint venture with Dow, according to the Financial Times.
Dow ticked higher after losing 20 percent on Monday.
On the economic front, the S&P Case-Shiller home-price index plunged by a record 18 percent in October.
Midwest business activity continued to moderate in December but not as much as expected. The Chicago Purchasing Managers Index rose to 34.1 from 33.8 in November; economists had expected a reading of 33.
Consumer confidence tumbled unexpectedly in December. The Conference Board's gauge of confidence fell to 38 from a downwardly revised 44.7 in November. Economists had expected a reading of 45.
Asian markets closed mixed in thin pre-holiday trading with the Nikkei logging the worst year in its history, down 42 percent in 2008, despite gaining 1.3 percent on its final half-day of trade.
European shares gained in early trade, buoyed by oil companies, with most stock exchanges entering the last full-day session of 2008.
Still to Come:
TUESDAY: Consumer confidence
WEDNESDAY: Weekly mortgage applications; jobless claims; weekly crude and natural-gas inventories; Several world markets closed for New Year's Eve; U.S. bond market closes at 2pm-Stock market open until 4pm
THURSDAY: All U.S. financial markets closed for New Year's day
FRIDAY: ISM manufacturing index
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