Wall Street extends big rally

A stock market gaining in confidence shot higher for a second straight session today as investors bet that President-elect Barack Obama’s plans to increase infrastructure spending will help lift the economy back to health.

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

Mr Obama’s plan calls for the largest US public works spending programme since the creation of the interstate highway system a half-century ago.

That could bolster the 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, the world’s third-largest aluminium producer, surged 18% on the news; while heavy-equipment maker Caterpillar jumped 11%.

Investors also grew more confident as the government neared a deal to dole out billions to America’s three biggest car makers.

The White House said today that it was very likely to strike an agreement with Congress on funnelling money to General Motors, Chrysler LLC and Ford Motor Co.

The package is expected to total about 15 billion (€11.61 billion).

The 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 Labour Department report that showed the US 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 recognise 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.

The Dow rose 298.76, or 3.46%, to 8,934.18, its highest close since it finished at 9,139.27 on November 5.

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%, to 909.70; and the Nasdaq composite index jumped 62.43, or 4.14%, to 1,571.74.

It was the ninth advance in 11 sessions for the Dow and the S&P 500.

The Russell 2000 index of smaller stocks rose 20.29, or 4.40%, to 481.38.

Bond prices fell as investors put money back into stocks.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.74 % from 2.70% late Friday.

The yield on the three-month T-bill, considered one of the safest investments, was unchanged at 0.01%, still indicating a high degree of investor uneasiness.

The dollar was mixed against other major currencies, while gold prices rose.

Among the car makers, GM rose 85 cents, or 21%, to 4.93, while Ford rose 66 cents, or 24.2%, to 3.38. Chrysler isn’t publicly traded.