Signs recession nears bottom, but layoffs persist

New signs that the recession could be nearing a bottom emerged Thursday, as factory orders were far better than expected and the Dow industrials surged over 8,000 for the first time in two months.

The Commerce Department said orders for manufactured goods rose 1.8 percent in February, reversing six straight monthly declines and easily beating estimates of another drop. Other economic indicators came in better than expected Wednesday, including construction spending and pending home sales.

Meanwhile, world leaders meeting in London on Thursday pledged $1.1 trillion to global institutions such as the International Monetary Fund to combat the downturn. And the European Central Bank agreed to cut a key interest rate to a record low of 1.25 percent.

Still, the job situation remains grim. Traditionally, the labor market doesn't pick up until well after a recovery has started.

The monthly unemployment report due out Friday likely will be dismal, and new jobless claims reported Thursday were worse than expected.

The Labor Department said initial claims for unemployment insurance rose to a seasonally adjusted 669,000 from the previous week's revised figure of 657,000. That total was above analysts' expectations and the highest in more than 26 years, though the work force has grown by about half since then.

Financial stocks led a rally on Wall Street after the board that sets U.S. accounting standards gave banks and other companies more leeway when valuing assets and reporting losses. The Dow Jones industrial average added more than 290 points, or 3.8 percent, to 8,053 in afternoon trading, the first time it has risen above 8,000 since Feb. 10. Broader indices also surged.

Bank of America Chief Executive Ken Lewis also bolstered the financial markets when he told CNBC that the recession is "getting close to the bottom."

Still, economists said the jobless claims figures indicate that companies continue to lay off workers at a rapid pace.

"Claims are typically one of the very first indicators to signal economic recovery, and there is no sign of that in the data yet," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a client note.

The tally of laid-off workers claiming benefits for more than a week rose 161,000 to 5.73 million, setting a record for the 10th straight week. That also was above analysts' expectations and indicates that unemployed workers are having difficulty finding new jobs. The continuing claims data lag the initial claims by one week.

An additional 1.5 million people received benefits under an extended unemployment compensation program Congress approved last year. That's as of March 14, the latest data available. Jobless benefits typically last 26 weeks, but the federal government is paying for an additional 20 to 33 weeks of compensation under the extended program, depending on each state's unemployment rate.

As a proportion of the work force, the number of people on the jobless benefit rolls is the highest since May 1983. The four-week moving average of jobless claims, which smooths out weekly volatility, rose to 656,750, the highest since October 1982, when the economy was emerging from a steep recession.

Employers are eliminating jobs and taking other cost-cutting measures to deal with sharp reductions in consumer and business spending. The current recession, now in its 17th month, is the longest since World War II.

Economists forecast that Friday's report will show employers cut 654,000 jobs in March, while the unemployment rate increased to 8.5 percent from 8.1 percent, according to a survey by Thomson Reuters.

Some economists raised their projection for job losses in March in response to the increase in claims. David Resler, chief economist at Nomura Securities International, said he now expects the department will report payroll cuts of 725,000 in March, up from a previous forecast of 680,000.

Companies reduced their payrolls by 651,000 jobs in February, a record third straight month of job losses above 600,000.

A private survey Wednesday said businesses cut 742,000 jobs in March. Employment at medium- and small-sized companies fell the sharpest — by a combined 614,000. The rest of the job cuts came from big firms — those with 500 or more workers_ according to the report from Automatic Data Processing Inc. and Macroeconomic Advisers LLC.

More job losses were announced this week. 3M Co., the maker of Scotch tape, Post-It Notes and other products, said Tuesday it's cutting another 1,200 jobs, or 1.5 percent of its work force, because of the global economic slump. Fewer than half the jobs will be in the U.S., but include hundreds in its home state of Minnesota. The 1,200 figure includes cuts made earlier in the first quarter.

Elsewhere, healthcare products distributor Cardinal Health Inc. said it would eliminate 1,300 positions, or about 3 percent of its work force, and semiconductor equipment maker KLA-Tencor Corp. said it will cut about 600 jobs, or 10 percent of its employees.

Among the states, California reported the biggest increase in new claims for the week ending March 21 with a jump of more than 6,700, which it attributed to layoffs in the construction and service industries. The next largest increases were in Missouri, Kansas, Oklahoma and Iowa, according to the Labor Department data.

The biggest drop was in Texas, which had 4,822 fewer claims as the trade, service, manufacturing and transportation industries cut fewer jobs. New York, Tennessee, Illinois and Virginia had the next largest declines.

The Federal Reserve has cut a key benchmark interest rate to nearly zero in an effort to jump-start lending and embarked on a series of radical programs to inject billions of dollars into the financial system.

The Obama administration's $787 billion stimulus package, approved by Congress in February, is trying to counter the recession by providing money for public works projects, extending unemployment benefits and helping states avoid budget cuts.

Dow ends up nearly 500 on Geithner treasury report

Wall Street staged a surprising comeback Friday, with the major indexes jumping more than 5 percent and the Dow Jones industrials surging nearly 500 points in a late afternoon rally, ending another volatile week that saw stocks reach six-year lows.

Stocks erased about half of the losses that came in steep selling Wednesday and Thursday after investors got an unexpected jolt of confidence late Friday following an NBC News report that President-elect Barack Obama plans to name New York Federal Reserve President Timothy Geithner as Treasury secretary.

Investors have been looking for a clear message from Obama on who will lead his economic brain trust at a time when the country is facing its biggest financial crisis since the Great Depression. In addition, some on Wall Street have grown frustrated with outgoing Treasury Secretary Henry Paulson over his handling of the government's effort to rescue the banking system.

A senior Democratic official familiar with the deliberations confirmed to The Associated Press that Geithner is likely to be named as Treasury secretary. The official requested anonymity because the nomination hasn't been formally announced.

The advance in stocks also came as the FDIC said it would guarantee up to $1.4 trillion in U.S. banks' debt for more than three years as part of the government's financial rescue plan. The directors of the Federal Deposit Insurance Corp. voted Friday to approve the plan, which is meant to break the crippling logjam in bank-to-bank lending.

Stocks fluctuated throughout most of trading Friday, as fresh concerns over the stability of the financial sector prevented the market from establishing any sustainable gains. But stocks moved sharply higher in the final half hour after the report on Geithner.

Despite Friday's gains, stocks are still down sharply for the week. The Dow has lost 5.31 percent, while the S&P 500 fell 8.39 percent and the Nasdaq lost 8.74 percent.

According to preliminary calculations, the Dow rose 494.13 points, or 6.54 percent, on Friday to settle at 8,046.42. The benchmark Standard & Poor's 500 index jumped 47.59, or 6.32 percent, to 800.03, and the Nasdaq composite advanced 68.23, or 5.18 percent, to 1,384.35.

Stocks dive on belief global recession is at hand

Another bad day for the stock market. At least for the time being it is. Even though the stock market only been open for 30 minutes, stocks have plunged.

Wall Street joined world stock markets in a precipitous plunge Friday, with the Dow Jones industrials dropping more than 300 points in early trading. The growing belief that the world will suffer a punishing economic recession has investors furiously dumping stocks.

The massive decline was caused by increasingly grim news from overseas. In Japan, shares of Sony sank more than 14 percent after it slashed its earnings forecast for the fiscal year. In Germany, Daimler's stock dropped 11.4 percent in morning trading after it reported lower third-quarter earnings and abandoned its 2008 profit and revenue guidance.

Japan's Nikkei stock average fell a staggering 9.60 percent. In Europe, Germany's benchmark DAX index was down 9 percent, France's CAC40 dropped 8.9 percent while Britain's FTSE 100 sank 8.2 percent after the government said its gross domestic product fell 0.5 percent in the third quarter, putting the country on the brink of recession.

The dour outlook convinced investors that the world economy is headed for a long and severe downturn despite a raft of government rescue efforts aimed at pulling the financial system from the brink. It also indicated that the tremors caused by the global credit crisis may have only begun to be felt in their true scope and magnitude.

"There's a lot of panic out there today," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York. "People have been saying that we're in a recession. This is the realization."

Fearing more carnage in world equity markets, big hedge funds and other institutional investors have been pulling out their money en masse in a bid to reduce risk and raise cash -- a process known as deleveraging that only intensifies the selling. Meanwhile, individual investors that have seen their holdings decimated in recent weeks have been yanking money out of mutual funds, adding to the downward pressure on markets.

"I think it would be natural to make an assumption that there are some funds in trouble and that we may see some funds shut down," Fullman said.

In the first hour of trading, the Dow fell 378.33, or 4.35 percent, to 8,312.9 after falling 500 soon after the opening bell.

Broader stock indicators also fell. The S&P 500 index fell 44.33, or 4.88 percent, to 863.78, and the Nasdaq composite index fell 74.13, or 4.62 percent, to 1,529.78.

The Russell 2000 index of smaller companies fell 22.15, or 4.52 percent, to 467.77.

On the New York Stock Exchange, 115 issues advanced while 2,630 declined. Volume came to 171.5 million shares.

The market's open was quieter than many on Wall Street had predicted. Investors had been bracing for a rocky start after futures contracts for the Dow and the S&P 500 fell so low they triggered "circuit breakers," which froze selling until the market's 9:30 a.m. EDT open. That slide raised the possibility that circuit breakers intended to prevent panic selling could be triggered during regular trading -- something that hasn't happened since 1997.

The thresholds that would trigger a halt in trading are set at a decline of 10 percent, 20 percent and 30 percent in the Dow, based on where that index was at the beginning of the current quarter; that would mean declines of 1,100 points, 2,200 points and 3,300 points, respectively.

If the Dow Jones industrial average falls 1,100 points before 2 p.m., the market will shut down for an hour. If the threshold is breached between 2 p.m. and 2:30 p.m., the halt will last 30 minutes. Trading would stop again if the Dow falls by 2,200 points. If the Dow falls by 3,300 points at any time, trading would be halted for the day.

Still, the final hour of trading is a crucial period as well, with many inventors trying to square away their positions at the last minute.

Gary Townsend, president and CEO of Hill-Townsend Capital Inc., said a halt in trading was a possibility.

"It's a way of smoothing market activity and making it orderly. No one would like to see it," he said.

Elsewhere in Asia on Friday, Hong Kong's Hang Seng index fell 8.3 percent to 12,618. Markets in India, Thailand, Indonesia and the Philippines were also down sharply as investors bailed from emerging markets to cut their exposure to risky assets and meet redemption needs at home.

The intensifiying gloom over growth expectations is having the added impact of putting small economies and currencies under extreme pressure. Investors are pulling money out of countries in Eastern Europe, Latin America and Asia on fears vulnerable countries will not only be hit hard by the financial crisis but may also default on debt.

In Europe, for example, Hungary, Ukraine and Belarus are all, like Iceland, in talks with the IMF to discuss possible loans.

Meanwhile, demand for U.S. Treasurys jumped as investors sought safe places to put their money. The three-month bill, regarded as the safest asset around, yielded 0.78 percent, down from 0.94 percent late Thursday.

There were signs that credit markets continue to thaw but are doing so more slowly amid growing economic fears. The rate on three-month loans in dollars -- known as the London Interbank Offered Rate, or Libor -- fell to 3.52 percent from 3.54 percent on Thursday.

The rates have fallen steadily for 10 days as confidence in the banking industry has been helped somewhat by government rescue measures. However, the improvements were smaller Friday on widening concerns about the health of the global economy.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.58 from 3.66 percent late Thursday.

The U.S. dollar, meanwhile, plunged below 93 yen, a 13-year low, as traders reacted to dismal U.S. jobs data that spurred speculation the Federal Reserve might cut interest rates. Meanwhile, gold prices plunged as low as $681 an ounce, the lowest trading level since Jan. 11, 2007.

Light, sweet crude fell $3.66 to $64.18 on the New York Mercantile Exchange. The sell-off, another sign that investors fear a severe recession, came despite OPEC's announcement that it will cut production by 1.5 million barrels a day in a bid to shore up sagging prices.

Stocks turn higher as investors hunt for bargains

Wall Street turned higher in erratic trading Thursday as investors, while still nervous about growing signs of a weakening economy, picked up bargains from stocks that were beaten down in a two-day selloff. The Dow Jones industrial average rose 180 points and outpaced the gains of other major indexes as energy stocks bounced higher from a drop in oil.

There was little confidence behind the buying; investors were attracted to stocks that were pummeled in two days of selling that sliced nearly 750 points off the Dow. There is a growing belief on the Street that the economy is either in a recession or headed for one despite government relief efforts and gradual improvements in world credit markets.

With its move higher, Wall Street is living up to predictions that trading will remain volatile for some time to come as investors try to test whether the market has formed a bottom.

"It's people coming in that see tremendous value, but for a more sustainable advance I think we need more time," said Steven Goldman, chief market strategist at Weeden & Co. in Greenwich, Conn.

Wall Street digested a rush of corporate news. Goldman Sachs Group Inc. is preparing to cut about 10 percent of its work force, according to a person briefed on the plan who requested anonymity because the company hadn't publicly disclosed details of the plan.

Meanwhile, drugmaker Eli Lilly and Co. said it booked a loss for the third quarter on a charge of almost $1.5 billion for an expected settlement of an investigation into the marketing of its top-selling drug, Zyprexa. Dow Chemical Co. said its quarterly profit rose 6 percent, helped by price hikes that offset a nearly 50 percent increase in raw materials and energy costs.

A snapshot of the labor market signaled that it continues to weaken. The Labor Department reported Thursday that new applications for unemployment benefits rose 15,000 last week to a seasonally adjusted 478,000. That was slightly above analysts' estimates of 470,000. Jobless claims above 400,000 are considered a sign of recession. A year ago, claims stood at 333,000, the department said. Analysts caution, however, that the weekly readings can be volatile.

Investors viewed the data as more evidence that the financial crisis is battering the economy and forcing companies to cut back. Market anxiety was already high as investors sift through a batch of corporate forecasts that has stirred intense unease about the health of the global economy.

Thomas J. Lee, U.S. equities strategist at JPMorgan Chase & Co. in New York, cautioned that the market will need to rein in its sharp swings before some investors will feel confident enough to return.

"I don't think anyone can buy and sell stocks right now with conviction," he said.

The Dow rose 182.47, or 2.14 percent, to 8,701.68 after earlier falling 125 and rising more than 277. On Wednesday, the Dow lost 514 points as investors worried that the global economy is poised to weaken. That was on top of a 231-point loss Tuesday.

Broader stock indicators also rose after showing early declines. The Standard & Poor's 500 index advanced 15.35, or 1.71 percent, to 912.13, and the Nasdaq composite index rose 4.55, or 0.28 percent, to 1,620.30.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 460.5 million shares.

Credit markets continued to show signs of slow improvement, although figures released Thursday suggested a return to more normal market conditions will take time. The rate on three-month loans in dollars -- known as the London Interbank Offered Rate, or Libor -- was unchanged at 3.54 percent. The rate fell to that level on Wednesday and is the lowest since Sept. 24.

Demand for short-term Treasury bills, regarded as the safest assets around, was little changed. The three-month Treasury bill yielded 1 percent, down from 1.01 percent late Wednesday. The levels are a notable improvement from the 0.20 percent seen last week, when investors were willing to trade the slimmest of returns for a safe place to keep their money.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.65 percent from 3.60 percent late Wednesday.

The dollar was mixed against rival currencies after jumping to multiyear highs Wednesday, while gold prices fell.

Light, sweet crude rose $1.73 to $68.48 on the New York Mercantile Exchange. The contract on Wednesday fell to a new 16-month low as big increases in U.S. crude and gasoline stocks fed beliefs that the economic downturn is eroding demand for energy.

The rise in oil gave a lift to energy companies and helped ease some worries about the economy, according to Ryan Larson, head of equity trading at Voyageur Asset Management, a subsidiary of RBC Dain Rauscher in Chicago. While the stock market often cheers a drop in oil, recent declines have worried some investors that they portended a falloff in economic activity.

"You're seeing a connection between oil and the markets, and we're seeing a bounce," Larson said. "The market is thinking maybe the slowdown might not be as imminent as we first thought, or maybe its priced into the market."

Oil fell Wednesday to its lowest level in 16 months, hurting energy stocks. But the rebound sent them higher Thursday. Exxon Mobil Corp. rose $3.82, or 5.9 percent, to $68.39, while Chevron Corp. advanced $3.77, or 6.1 percent, to $65.51.

Goldman Sachs fell $7, or 6.1 percent, to $107.71. Eli Lilly rose $1.30, or 4.1 percent, to $33.41, while Dow Chemical rose $1.65, or 7.5 percent, to $23.76.

The Russell 2000 index of smaller companies fell 1.80, or 0.36 percent, to 500.17.

Overseas, Japan's Nikkei stock average fell 2.46 percent. Britain's FTSE 100 fell 0.25 percent, Germany's DAX index fell 1.50 percent, and France's CAC-40 lost 1.57 percent.