NEW YORK - A stock market gaining in confidence shot higher for a second straight session Monday as investors bet that President-elect Barack Obama's plans to increase infrastructure spending will help lift the economy back to health. The major market indexes jumped more than 3 percent, and the Dow Jones industrials' nearly 300 point advance gave the blue chips their highest close in a month.
Obama's plan calls for the largest U.S. public works spending program since the creation of the interstate highway system a half-century ago. That could bolster the economy by putting thousands of people to work building schools and other construction projects.
His weekend announcement gave a lift to a range of companies, from machinery makers to materials producers. Alcoa Inc., the world's third-largest aluminum producer, surged 18 percent on the news; while heavy-equipment maker Caterpillar Inc. jumped 11 percent.
Investors also grew more confident as the government neared a deal to dole out billions to America's three biggest automakers. The White House said Monday that it was "very likely" to strike an agreement with Congress on funneling money to General Motors Corp., Chrysler LLC and Ford Motor Co. The package is expected to total about $15 billion.
The stock market has become more optimistic although a number of reports last week seemed to indicate the recession is showing no signs of weakening. As the week progressed, the market appeared to be taking the bad news in stride - even Friday's Labor Department report that showed the nation lost more than a half million jobs last month. The report raised hopes that the government would take more steps to stimulate the economy.
"I think people recognize that the government is going to throw everything that they can at this market, everything they can at the economy to make it work," said James Cox, managing partner at Harris Financial Group. "We had bad jobs numbers on Friday. To be able to overcome those type of job losses and have that kind of rally, that is technically significant. If that doesn't make you bullish, I don't know what does."
According to preliminary calculations, the Dow rose 298.76, or 3.46 percent, to 8,934.18, its highest close since it finished at 9,139.27 on Nov. 5. The blue-chip index, which added 259 points on Friday, is now up for December.
Broader indexes also rose. The Standard & Poor's 500 index advanced 33.63, or 3.84 percent, to 909.70; and the Nasdaq composite index jumped 62.43, or 4.14 percent, to 1,571.74.
It was the ninth advance in 11 sessions for the Dow and the S&P 500.
The Russell 2000 index of smaller stocks rose 20.29, or 4.40 percent, to 481.38.
Bond prices fell as investors put money back into stocks. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.74 percent from 2.70 percent late Friday. The yield on the three-month T-bill, considered one of the safest investments, was unchanged at 0.01 percent, still indicating a high degree of investor uneasiness.
The dollar was mixed against other major currencies, while gold prices rose.
David Kelly, chief market strategist at JPMorgan Funds, said professional investors are being drawn to the market by cheap stock prices and a sense that while the economy is weak now it will eventually begin to regain its strength.
"The reality in the economy is it's getting worse but eventually the economy will turn around," he said. "Even if the economy is lousy in 2009 stocks are a long-term investment and are cheap."
Still, analysts said the market remains fragile.
Scott Fullman, director of derivative investment strategies with WJB Capital, warned that the move higher for U.S. markets should be treated cautiously. He said credit still remains tight around the world, and that there are still a number of other worries hanging over the market.
"There's a chance we could be higher for the day, but I'd be very cautious about jumping in with both feet and expecting what could be a Santa Claus rally going into the New Year," he said. "The fact is, we're not seeing the credit markets opening up, we're not seeing buying of the distressed debt, and that leads to additional worries for stocks."
With little in the way of economic data to trade on, investors closely monitored corporate news for direction.
Among the automakers, GM rose 85 cents, or 21 percent, to $4.93, while Ford rose 66 cents, or 24.2 percent, to $3.38. Chrysler isn't publicly traded.
Consumers hungry for a deal boosted worldwide sales at McDonald's Corp.'s established locations by 7.7 percent in November. The company said that U.S. same-store sales - or sales at locations open at least a year - rose 4.5 percent. Shares of the company fell $1.80, or 2.9 percent, to $60.92.
Dow Chemical Co. rose $1.37, or 7.2 percent, to $20.37 after the company announced it will slash 5,000 jobs and shutter 20 plants to rein in costs. It expects to save about $700 million per year by 2010.
3M Co. is cutting 1,800 jobs in the fourth quarter and ordering some workers to take vacation or unpaid time off for the last two weeks of the year. The Maplewood, Minn.-based manufacturer had earlier announced 1,000 job cuts in the third quarter. The 1,800 new layoffs will come from the U.S., Western Europe and other developed nations. The company also lowered its 2008 earnings outlook and forecast 2009 profit below Wall Street expectations, citing slowing revenue. The stock fell $2.47, or 4.1 percent, to $57.38.
Tribune Co. filed for bankruptcy Monday, as expected. The privately held owner of the Los Angeles Times and Chicago Tribune, other newspapers and the Chicago Cubs and Wrigley Field, is struggling with $13 billion in debt. A steep slump in advertising revenue has hurt the company. Most of its debt stems from a complex transaction in which the company was taken private by real estate mogul Sam Zell last year.
Oil prices bounced off four-year lows after OPEC's president suggested the group could surprise investors with a large production cut later this month. Light, sweet crude rose $2.90 to settle at $43.71 a barrel on the New York Mercantile Exchange.
The move higher follows a global rally as investors took heart from signs the world's largest economies are redoubling efforts to revive growth. In China, government officials this week are meeting to discuss possible new steps to expand the $586 billion stimulus that is already in place.
Hong Kong's Hang Seng index vaulted 8.7 percent to its highest close in seven weeks, while Japan's Nikkei 225 average rose 5.2 percent. Major European bourses also showed big gains. Britain's FTSE-100 climbed 6.2 percent, Germany's DAX jumped 7.6 percent, and France's CAC-40 surged 8.7 percent.