Stocks Gain on Strength in Commodities

Major indexes see-sawed in choppy trading Wednesday as Wall Street kept a watchful eye on the auto-sector bailout talks

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U.S. stocks closed higher Wednesday, led by gains in commodities-related issues as crude oil and gold futures rallied. Market observers cited by S&P MarketScope said a number of investors shifted funds out of financials and into energy and materials stocks. This rotation came as investors weighed various sectors' near-term prospects for gains against the uncertain economic outlook.

Trading, however, was choppy for much of Wednesday's session, with the market seesawing amid the lingering debate in Washington over the proposed $15 billion bailout of Detroit automakers Chrysler LLC, General Motors (GM), and Ford Motor Co. (F). The fate of the proposed bailout remained unclear at the end of Wednesday's session.

Traders weighed reports that showed U.S. wholesale inventories falling 1.1% and wholesale sales down by 4.1% in October, both worse than expected by the market; and that the government posted a $164.4 billion November budget deficit.

Bonds were mixed. The dollar index was lower. Gold futures soared on a technical breakout. Oil futures were up despite inventory data showing a rise in crude stockpiles.

On Wednesday, the Dow Jones industrial average finished higher by 70.09 points, or 0.81%, at 8,761.42. The broad S&P 500 index was up 10.57 points, or 1.19%, at 899.24. The tech-heavy Nasdaq composite index added 18.14 points, or 1.17%, to 1,565.48.

On the New York Stock Exchange, 20 stocks were higher in price for every 11 that fell. The ratio on the Nasdaq was 15-12 positive.

European equities ended mixed Wednesday, with London stocks falling 0.32%, Paris up 0.68%, and Frankfurt gaining 0.54%. Asian markets finished with gains, with Tokyo stocks rising 3.15%, Hong Kong up by 5.59%, and Shanghai climbing 2.03%.

The Wall Street Journal reports that American International Group (AIG) owes Wall Street's biggest firms about $10 billion for speculative trades that have soured, according to people familiar with the matter, underscoring the challenges the insurer faces as it seeks to recover under a U.S. government rescue plan. The details of the trades go beyond what AIG has explained to investors about the nature of its risk-taking operations, which led to the firm's near-collapse in September.

Ivory Investment Management LP, one of Yahoo Inc.'s (YHOO) largest stockholders, proposed to Yahoo's board that the company salvage a deal with Microsoft (MSFT). Under the proposal, Microsoft would own and operate the combined search platform, with Yahoo becoming an affiliate that retains 80% of the revenue generated through searches on its own site. Finally, Microsoft would become the search engine for Yahoo's existing search affiliates. Ivory believes a search deal with Microsoft could deliver value to Yahoo shareholders of $24-$29 per share.