Stocks climb on auto rescue hope

NEW YORK (Reuters) - U.S. stocks rose on Wednesday as investors bet that Washington will provide aid for automakers and rising oil and commodities prices lifted shares of natural resource companies.

Chevron rose 2.5 percent and Exxon Mobil gained 2 percent, while aluminum producer Alcoa rose nearly 6 percent, all propelling the Dow industrials.

But a fresh wave of profit warnings from companies including Eastman Kodak and Electronic Arts limited a broad market advance, a day after a stock sell-off halted 2-day rally.

"People are looking at the bailout as a positive," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey. "(But) The headwinds are just enormous, this market has an awful lot to get through.

The Dow Jones industrial average <.DJI> rose 123.61 points, or 1.42 percent, to 8,814.94. The Standard & Poor's 500 Index <.SPX> gained 13.69 points, or 1.54 percent, to 902.36. The Nasdaq Composite Index <.IXIC> added 21.99 points, or 1.42 percent, to 1,569.33.

The White House and congressional Democrats reached an agreement in principle to aid U.S. automakers, including General Motors .

Without government help, investors fear that a possible failure or bankruptcy in the auto sector could send shock waves

through the economy and worsen unemployment.

Backers of the $15 billion proposal for bailing out U.S. automakers could come to a vote in the House as early as Wednesday, officials said.

Shares of GM were up 5 percent to $4.94 on the New York Stock Exchange and Ford gained 2.5 percent to $3.31.

In the energy sector, Chevron rose to $76.94 and Exxon Mobil climbed to $79.49. U.S. front-month crude was up 5 percent to $44.51 a barrel before a weekly government report on energy stockpiles.

Earnings news and outlooks continued to cast a pall. Shares of Eastman Kodak slid more than 6 percent to $6.76 after the photography company warned 2008 revenue and profit will fall short of expectations.

Video game publisher Electronic Arts shares tumbled 14 percent to $16.70, putting the stock among the top drags on the Nasdaq, a day after the company cut its outlook.

Shares of Apple Inc slumped nearly 3 percent to $97.22 after Morgan Stanley cut its price target on the maker of the iPhone, citing weaker demand.

Meanwhile, American Express shed almost 5 percent to $22.12 after Citigroup initiated coverage of the stock with a sell rating.

Year-to-date the S&P 500 is off 39.5 percent but has gained 18 percent since hitting a November 21 low. From its October 2007 record high, the index is off about 43 percent.

(Editing by Kenneth Barry)

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