U.S. Markets Spike in Late Trading

After two days of brutal selling that pushed Wall Street to its worst levels in years, stocks rallied today as investors sought to end the volatile week with a rebound and reports surfaced that President-elect Barack Obama has chosen a Treasury secretary.

The market initially soared this morning with a boost from bargain hunters unleashed to pick up cheap stocks after the Dow Jones industrial average lost 10 percent of its value during the last two days. But stocks spent most of the afternoon fluctuating between positive to negative territory as investors continued to grapple with the country's economic woes and fears about the stability of the financial sector.

Then in what has become a common occurrence, the final hour of trading turned volatile again. Stocks surged this afternoon after CNBC and Wall Street Journal reported that New York Federal Reserve Bank President Timothy J. Geithner will be nominated to be Treasury secretary in the new administration.

The Dow closed up 6.5 percent, or 494 points, at 8046. The Standard & Poor's 500 index rose 6.3 percent or 48 points, to 800, while the tech-heavy Nasdaq spiked 5.2 percent, or 68 points, to 1384.

Despite the significant recovery, the market still reports another weekly loss, dashing investor hopes that stocks had reached their low point. The Dow was down about 5 percent for the week, while the S&P and Nasdaq and S&P fell about 7 percent.

Geithner has the right experience for the position and is viewed as steady presence during a crisis, said Christopher Low, chief economist at Memphis-based FTN Financial. That "is exactly the kind of experience you need when you are spearheading the international response to the credit crisis and international reform of the financial market regulation," Low said.

Wall Street has become concerned that additional financial rescue efforts would be on hold until the new administration was in place, but the appointment of Geithner could speed that process, said Low. "It is not just that Geithner is sold and qualified," Low said. "The market has lost faith in Henry Paulson. The fact that there is finally someone else we can turn to in this crisis."

Investors continue to seek the safety of government bonds. The yield on a three-month government bond, which fell to .01 percent yesterday, recovered some ground today, but remains historically low indicating that investors are willing to make less on their investment. Gold, another safe haven during market turmoil, was also up again today, trading up 7 percent to $800 an ounce.

Citigroup remains under the Wall Street's microscope after announcing this week it would shed about 50,000 jobs and seeing its stock price collapse to less than $5 a share -- its lowest level in 15 years. Its stock, which has already lost half its value this week, was down another 22 percent today before the close despite reports that the firm is now contemplating several options, including selling off pieces of itself.

Citigroup has also asked the Securities and Exchange Commission to re-institute a ban on short selling of its stock. Short sales are bets that a stock price will go down and financial industry executives have blamed the practice for steep declines in their shares.

The entire financial sector has been under pressure this week, pummeled by worries that the government's financial rescue plan will not be enough to stabilize banks and that the companies will have to write down more losses to account for the deteriorating economy.

JP Morgan, which is expected to announce that it will lay off 3,000 investment banking staff members, was down 9 percent today. Bank of America fell 4 percent.

Wall Street was also concerned about the future of the auto industry after an emergency $25 billion loan program stalled on Capitol Hill. House Speaker Nancy Pelosi (D-Calif.) and Senate Majority Leader Harry Reid (D-Nev.) have told the heads of General Motors, Ford and Chrysler they need to develop a plan before Congress will agree to a federal bailout of the industry.

General Motors and Ford are flat and down 3 percent respectively. Chrysler is flat

A more pessimistic economic view has gripped Wall Street. Goldman Sachs said in a report today that it now expects unemployment to reach 9 percent this year and the gross domestic products to fall at a 5 percent annual rate during the fourth quarter. Corporate profits will fall 10 percent this year and 25 percent in 2009, which would mark the biggest drop since 1938, the report said.

"This deepens and extends the expected recession, bringing the drop in GDP close to the decline seen in 1982," Jan Hatzius, a Goldman's analyst, said in a report.

A "major driver" of the pessimistic view is a series of poor economic data and weak corporate profits that have surpassed even economists' most pessimistic expectations. But the transition to an Obama administration has also stalled some fiscal rescue measures, including the deployment of more cash from the $700 billion financial rescue package, the report said. "The main reason for the downgrade to our forecast is the policy impasse that has developed in Washington and the tightening in financial conditions it has provoked," Hatzius' report said.

In corporate news, Wal-Mart announced this morning that its chief executive, Lee Scott, planned to retire in February. he is being succeeded by Mike Duke, Wal-mart's current international chief. The discount store has outperformed the rest of the retail sector during a financial crisis that has included a steep downturn in consumer spending. Its stock is up 2.5 percent.

Other retailers also got a boost today. Gap and Limited Brands surged 16 percent and 5 percent after Citigroup raised the companies' ratings.

But Ann Taylor was down 14 percent after reporting that it swung to a $13 million loss during the third quarter. "Our business turned soft in the third quarter, reflecting the dramatic deterioration in the overall economy and consumer spending -- particularly during the latter part of the period," Kay Krill, Ann Taylor's chief executive, said in a statement.

Dell, the giant computer maker, reported a 5 percent drop in net income during its third quarter as corporate customers scaled down their spending. But that beat analysts expectations and its stock was up 3 percent.

Crude oil prices fell slightly this morning after plunging below $50 a barrel yesterday for the first time since 2005. It settled down at $49.93 a barrel.

Analysts had predicted crude oil, after peaking at $147 a barrel this summer, would fall to $50 a barrel, but were surprised by the speed of its descent. Many analysts are now predicting prices could fall to $35 to $45 a barrel.

Overseas stocks were mixed. London's FTSE and the Dax in Germany were down more than 2 percent. The Nikkei in Japan was up 2.7 percent.