Stocks Come Back from the Brink

Stocks managed to battle back from steep losses Friday despite growing evidence that the 14-month-old credit market crisis is taking a toll on the real economy.

Rising joblessness and home foreclosures and a warning from Nokia (NYSE: NOK) sent stocks into an early tailspin Friday, but they managed to recover by the close.

And after the close came the day’s biggest news, when the Wall Street Journal reported that a government rescue of Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE) could be announced this weekend. The critical question for the market will be how much common and preferred shareholders suffer under the plan. Index futures rose and Fannie and Freddie shares fell on the news in after-hours trading.

The U.S. Labor Department reported a bigger than expected job loss of 84,000 for August and a spike in the unemployment rate to a five-year high of 6.1%, and the Mortgage Bankers Association reported that delinquencies and foreclosures once again hit records.

Nokia (NYSE: NOK) weighed on the tech sector after warning its market share would fall in the third quarter because of the slowing economy and rising competition. Nokia shares fell 7.6%.

But SanDisk (NASDAQ: SNDK) was the day’s standout, soaring 31% on news that Samsung is interested in some kind of a tie up with the company.

ADC Telecom (NASDAQ: ADCT) jumped 11% after beating estimates, but National Semi (NYSE: NSM) lost 2.7% on lower than expected sales and guidance.

SiRF (NASDAQ: SIRF) jumped 22% on reports that it could be near a patent settlement with Broadcom (NASDAQ: BRCM).

The Nasdaq lost 3 to 2255, the S&P added 5 to 1242, and the Dow climbed 32 to 11,220. Volume declined to 5.02 billion shares on the NYSE, and 2.27 billion on the Nasdaq. Advancers led by a few issues on the NYSE, while decliners held a 15-12 edge on the Nasdaq. Upside volume was 63% on the NYSE, and 48% on the Nasdaq. New highs-new lows were 19-300 on the NYSE, and 28-178 on the Nasdaq.

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