(RTTNews) - Stocks experienced another volatile trading day on Friday, ending the session sharply higher after spending most of the day bouncing back and forth across the unchanged line. The uncertainty in the broader markets came as some positive corporate news partly offset the overwhelming nervousness surrounding the global economy.

The late day strength in the markets that contributed to the higher close was partly due to reports that president-elect Barack Obama has selected New York Federal Reserve President Tim Geithner as his nominee for Treasury Secretary. The news eliminated some of the uncertainty that has been hampering the markets recently.

Commenting on the news in the an interview with RTTNews, Chuck Lieberman, chief investment officer for Advisors Capital Management said, “[Geithner's] clearly got wonderful experience. He’s a little on the young side, but he’s thought of highly by all of the people who know him.” Lieberman added, “It looks like a very promising appointment.”

Earlier in the session, trading was impacted by some key corporate news and comments from Richmond Federal Reserve President Jeffrey Lacker. Speaking at the Tech Council of Maryland, Lacker struck a relatively hopeful tone in the midst of what is shaping up to be the worst economic crisis since the Great Depression.

“Looking ahead, many analysts expect the U.S. economy to regain positive momentum sometime in 2009. That strikes me as a reasonable expectation, for several reasons,” said Lacker, noting that monetary policy is now “quite stimulative” and that the major shocks that dampened economic activity this past year have subsided already.

Meanwhile, Philadelphia Federal Reserve economist Herb Taylor outlined the bleak near-term economic outlook during a presentation he gave earlier today. The forecast combined the Philadelphia Federal Reserve’s survey of forecasters as well as a recently released outlook from the National Association of Business Economists.

It’s “amazing how quickly the economic outlook has deteriorated in the last month or so,” he said, noting the drastic downward revisions to the surveys.

Released Monday, the Philadelphia survey revealed that forecasters project that GDP will decline 2.9 in the fourth quarter of 2008, and then by 1.1 percent in the first quarter of 2009, a sharp downward revision from the forecast three months ago, when both the fourth quarter 2008 and first quarter 2009 were expected to see slightly positive GDP.

“In the last month or so the question has become not whether we are in a recession, but how long and how deep that recession will be,” he said.

On the corporate front, Citigroup (C) is exploring the possibility of selling parts of the company or an outright sale following the plunge in its stock price, the Wall Street Journal reported Thursday, citing people familiar with the matter.

In other news, President Bush signed into a law an extension of unemployment relief in an attempt to help people laid off during the current economic turmoil. The law extends emergency unemployment compensation to 20 weeks and creates a second tier of 13 weeks of compensation for people in states with high unemployment rates.

Bush’s signing of the law came a day after government data indicated that initial claims for unemployment benefits had jumped to a 16-year high last week.

The major averages moved sharply higher going into the close, ending the session at or near their best levels of the day. The Dow closed up 494.13 points or 6.5 percent at 8,046.42, the Nasdaq closed up 68.23 points or 5.2 percent at 1,384.35 and the S&P 500 closed up 47.59 points or 6.3 percent at 800.03.

Despite Friday’s strong gains, the major averages still all closed lower for the third straight week. The Dow showed a 5.3 percent decline for the week, while the Nasdaq and the S&P 500 posted weekly losses of 8.7 percent and 8.4 percent, respectively.

Sector News

At the end of the trading day, nearly all of the major sector indices were posting gains, benefiting from the late day rally. With notable increases in the prices of many of the major commodities, resource stocks were some of the strongest performers of the day.

With a gain of 12.4 percent, the Amex Oil Index climbed off of the five and a half year closing low that it set on Thursday. The advance by oil stocks came as the price of oil closed up $0.51 at $49.93 a barrel after ending the previous session at a three-year closing low.

Gold stocks also posted strong gains amid a significant increase by the price of the precious metal, with the Amex Gold Bugs Index closing up 27.5 percent. Similarly, an increase by the price of natural gas helped to drive the Amex Natural Gas Index up 13.3 percent.

Significant strength also emerged in a variety of other sectors, with some utilities, real estate, and software stocks posting standout gains. Within the utilities sector, Williams (WMB), PSEG (PEG), and Exelon (EXC) turned in some of the best performances.

Dow Components

With the notable late day rally in the broader markets, most of the Dow components closed notably higher. One of the biggest gains was shown by Microsoft (MSFT), which climbed off of its lowest trading level in a decade with a gain of 12.3 percent. The advance came after the stock was upgraded to Outperform at Oppenheimer.

Shares of Alcoa (AA) also showed a particularly strong upward move, reflected the strength among resource stocks. The aluminum producer ended the session up 23.2 percent.

Other notable gains were shown by, Disney (DIS), which closed up 12.8 percent, and Hewlett-Packard (HPQ), which posted a gain of 8.8 percent.

Meanwhile, with a massive decline of 20 percent, Citigroup (C) was one of the worst performing Dow components of the day. JP Morgan (JPM) also closed lower, posting a loss of 2.8 percent.

Other Markets

Stock markets across the Asia-Pacific region closed higher on Friday, ending a four-day losing streak. Japan’s benchmark Nikkei 225 index ended the trading day posting a gain of 2.7 percent.

Meanwhile, the major European markets closed considerably lower despite showing earlier strength. The French CAC 40 Index and the German DAX Index ended the day with a loss of 3.3 percent and 2.2 percent, respectively, while the U.K.’s FTSE 100 Index fell 2.5 percent by the end of the session.

In the bond markets, treasuries closed well off their lows of the day but held below the flat-line. Subsequently, the yield on the benchmark ten-year note ended the session up 2.3 basis points at 3.167 percent after reaching a high of 3.273 percent.

Looking Ahead

While trading activity may be somewhat subdued next week due to the Thanksgiving Day holiday on Thursday, there are several economic reports being released in the holiday-shortened week.

Traders are likely to keep a close eye on reports on new and existing home sales, durable goods orders, personal income and spending, and a revised report on third quarter GDP.

In corporate news, several big name companies are due to release their quarterly results next week, including Analog Devices (ADI), Campbell Soup (CPB), Hewlett-Packard (HPQ), and Deere (DE).

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Posted in Categories: Economy, Eurozone, Japan, Releases, USA.

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