US markets rebound after record plunge

Dec 2, 2008, 21:29 GMT

Washington - US markets rallied Tuesday, recovering from the deepest plunge in a month on Monday that had erased about half of last week's rally amid fears of a widening economic slowdown.

There was good news from General Electric Co, which rose 14 per cent after the company announced that it would maintain its dividend of 1.24 dollars per share in 2009. GE said fourth-quarter profits would be at the lower end of its forecast, but the dividend would be protected by several changes in its finance arm.

GE's announcement was timely, coming at a time when the recession is forcing companies to shave off dividends and conserve their cash reserves.

Wells Fargo, Bank of America Corp and JP Morgan Chase climbed 9 per cent, leading Tuesday's recovery in financial shares.

Stocks plummeted Monday after industry figures showed that the US manufacturing sector fell to its lowest level since 1982, and the National Bureau of Economic Research, a group of top US economists considered the arbiters of economic activity, said a recession has been underway since December 2007.

Meanwhile, the three struggling US carmakers - Ford, GM and Chrysler - submitted recovery plans to Congress on Tuesday in hopes of getting their hands on federal aid as monthly car sales in the US tumbled more than 30 per cent.

Congressional leaders last month rejected the carmakers' request for a total of 25 billion dollars to help them restructure and stay out of bankruptcy. Lawmakers said they needed more concrete details on the companies' recovery plans before considering the bail-out.

Auto sales dropped in October to their lowest levels in 25 years as consumers struggled to get car loans, but lawmakers have argued the automakers' antiquated business model put them in dire straits well before the current economic crisis began.

On Monday, the blue-chip Dow Jones Industrial Average fell 679.95 points, or 7.7 per cent, to 8,149.09.

By the end of trading Tuesday, the Dow was up 270 points, or 3.31 per cent, to 8,419.09. The Standard & Poor's 500 rose 32.60 points, or 3.99 per cent, to 848.81. The technology-heavy Nasdaq Composite Index was up 51.73 points, or 3.70 per cent, to 1,449.80.

The US currency fell to 78.68 euro cents from 79.26 euro cents on Monday. The dollar rose against the Japanese currency to 93.29 yen from 93.15 yen on Monday.