Stocks may brake for GM, Fed, Goldman
NEW YORK (Reuters) - Wall Street's recovery push from 11-year lows could hit major speed bumps next week as investors fret about the U.S. automakers' fate and the Federal Reserve holds its last scheduled policy meeting of 2008.
The market's other big test will be the start of the quarterly reporting season for investment banks when Goldman Sachs (GS.N) and Morgan Stanley (MS.N) report results that most expect will show heavy losses.
The U.S. auto industry's survival hangs in the balance after a measure that sought to avert a possible bankruptcy by one or more of the nation's Big Three automakers collapsed in the U.S. Senate on Thursday.
Without government aid, investors fear that a failure of any of the three -- General Motors Corp (GM.N), Ford (F.N) or Chrysler -- would exacerbate the year-long recession and drag other companies under.
The automakers employ nearly 250,000 people directly and 100,000 more jobs at parts suppliers could hinge on their survival.
On Friday, the White House said it was willing to consider using some of the $700 billion initially approved by Congress to shore up the financial system to help the beleaguered auto industry. But it gave no indication when that help might come.
"It seems the way things are going to play out, they're going to keep the carmakers on life support in the intensive care unit until the new administration takes over," said William Stone, PNC Wealth Management's chief investment strategist in Philadelphia.
"On the other hand, maybe that doesn't help the market, either, because you will still sit there with the other uncertainty that you've got to put away the bad someday."
The bid for auto industry aid comes at the worst time as the United States is transitioning between administrations. President-Elect Barack Obama is set to be sworn in on January 20, succeeding George W. Bush as president.
On Friday, concerns about the automaker's fate rattled investors, causing Wall Street to gyrate between gains and losses in a choppy session. But advancing technology shares helped spark a late recovery.
The Dow Jones industrial average .DJI rose 64.59 points, or 0.75 percent, to end at 8,629.68. The Standard & Poor's 500 Index .SPX gained 6.14 points, or 0.70 percent, to 879.73. The Nasdaq Composite Index .IXIC climbed 32.84 points, or 2.18 percent, to 1,540.72.
For the week, though, the .DJI , the Dow still fell 0.1 percent. In contrast, the S&P 500 rose 0.4 percent and the Nasdaq finished the week up 2.1 percent.
THE FED'S LIMBO DANCE
But besides worrying about the auto upheaval, analysts said the Fed's policy meeting probably would give investors pause amid signs that the U.S. central bank is practically running out of room to cut interest rates and would have to try other means to revive the economy.
The Fed is widely expected to lower the benchmark fed funds rate by a half-percentage point to only 0.5 percent from 1 percent at the conclusion of its two-day meeting, which will begin on Tuesday. The Fed's announcement is expected at around 2:15 p.m. (1915 GMT) on Wednesday. Continued...
