Stocks climb back on new auto aid optimism

NEW YORK (Reuters) - Stocks clawed back from multiyear lows on Thursday after hopes of a deal to rescue U.S. automakers were revived, offsetting growing concerns about the deepening economic downturn.

A group of senators said a bipartisan agreement had been reached on a bill to aid automakers, news that sent shares of General Motors shares up more than 15 percent to $3.29 on the New York Stock Exchange. Ford was up more than 22 percent to $1.51.

Earlier, the S&P 500 benchmark index had tumbled to a six-year low on worries about the carmakers' fate and the economic turmoil.

The big-three U.S. automakers, including Chrysler, are pressing for a $25 billion bailout from the government to avert possible bankruptcy.

The Dow Jones industrial average was up 96.29 points, or 1.20 percent, to 8,093.57. The Standard & Poor's 500 Index was up 3.68 points, or 0.46 percent, to 810.26. The Nasdaq Composite Index was up 13.03 points, to 0.94 percent, at 1,399.45.

Earlier in the session, stocks had slid, taking the S&P 500 to its lowest level since October 2002 as another round of bleak economic data unnerved investors.

And not everyone was convinced that the auto rescue bill was going to be a lasting or comprehensive solution.

"Once the back and forth between the Big Three and Congress goes off the front pages next week, we'll be back into trying to figure out how deep and how long will this recession last," John Schloegel, vice president of investment strategies for Capital Cities Asset Management in Austin, Texas, said.

Data from the Labor Department showing that the number of new claims by U.S. workers for jobless benefits hit their highest level in 16 years in the recent week moved investors to the sideline, along with concern about the future of Citigroup.

In other economic news, factory activity in the U.S. Mid-Atlantic region fell to another 18-year low in November.

Shares of the Citigroup a major U.S. bank and Dow component, dropped to its lowest level in more than 13 years as investors remained concerned over the bloodletting in the financial sector.

With Congress winding down its session, the automakers' pitch to Washington for a $25 billion rescue package, which they say is necessary to avoid bankruptcy still left the fate of the industry hanging in the balance.