Coming into the session, markets were generally pessimistic following a profit warning from Wal-Mart and a rise in U.S. continuing jobless claims, but a rebound in the final minutes of trading led to a positive close. The S&P 500 gained 3 points, or 0.3%, to 909.

Market watchers looked to Barack Obama for inspiration in what was billed as a "major" speech, but got a sober economic assessment from the man who will take over the U.S. presidency in 12 days.

"For every day we wait or point fingers or drag our feet, more Americans will lose their jobs," he said. "More families will lose their savings. More dreams will be deferred and denied. And our nation will sink deeper into a crisis that, at some point, we may not be able to reverse."

The speech had positive undertones and outlined many of the ideas that have recently circulated, including a $1,000 tax cut for working families and improved regulation.

The Dow closed down 27 points, or 0.3%, to 8742 but that was skewed by a 7.7% decline in Wal-Mart shares. The Nasdaq closed higher by 18 points, or 1.1%, to 1617. Canadian stocks closed higher despite a decline in resource stocks. The TSX was up 100 points, or 1.1%, to 9221.

The U.S. dollar carried a negative tone throughout the session. It fell to session lows against the yen, euro and Swiss franc following the weekly report on jobless claims. Initial claims for unemployment benefits were better than expected, but continuing claims rose to 4611k from 4506k.

The U.S. dollar was down 1.54 to 91.12 against the yen with the Dollar Index falling 0.739 to 81.536.

The euro was up 0.0059 to 1.3705 against the U.S. dollar, down 0.0123 to 1.6170 against the Canadian dollar, down 0.0036 to 0.8997 against the pound sterling and was lower by 1.56 to 124.87 against the yen.

The pound sterling surged after the the Bank of England lowered interest rates by 50 basis points. The cut led to a nearly three-cent rally in the pound sterling, but the pound finished the session up 0.0133 to 1.5232 against the U.S. dollar.

The central bank expressed concern about the tight credit conditions and said it is considering measures to promote lending to businesses. The rate cut was in line with estimates, but some market participants thought the bank might cut by a larger amount and point to deteriorating economic conditions, according to Shaun Osborne, chief currency strategist at TD Securities.

"There was a strong feeling they could cut or they could hint about more to come or even go the way of the Fed with some kind of quantitative easing, none of those things happened," he said.

The yen was the top-performing major currency, followed by the Canadian dollar which was up 0.0100 to 0.8472 against the U.S. dollar (1.1799 USD/CAD).

The Canadian dollar's gains came despite a 1.2% decline in the 19-commodity CRB index and a 40-cent decline in oil to $42.28. The loonie made broad gains in the past two sessions despite a more than $8 drop in oil prices.

A trader in New York suggested that lower oil prices might not harm the Canadian economy. He noted that he saw little benefit of oil above $100 last year and suggested that there may be a similar effect below $50.

"Cheaper oil prices will benefit a lot of Canadians," he said, noting that "90% of Canadians don't live in Alberta."

The day ahead features the U.S. and Canadian jobs reports for December. In the U.S., economists expect nonfarm payrolls to decline by 510k. The Canadian economy is expected to lose 20k jobs.

Sebastian Lavoie, economist at Laurentian Bank, believes the Canadian economy lost twice that number of jobs. Factoring out distortions due to election hiring in October and November, he said the economy has been averaging 20k job losses and he expects that pace to accelerate because of the worsening global economy and commodity price declines.

"There's no reason to think the jobs market improved," he said.

Fixed income markets were relatively quiet ahead of the jobs reports. Yields fell after a $16 billion, 10-year U.S. reopening was stronger than expected.

U.S. two-year yields were up 1.6 bps to 0.83%, with five-year yields down 8.2 bps to 1.58%, 10-year yields down 5.3 bps to 2.44% and 30-year yields flat at 3.04%. The Eurodollar March 09 contract was up 6.5 ticks to 99.02. The yield curve was flatter, with the 10/2-year spread down 6.9 bps to 161.13 bps.

Yields on two-year Canadian government bonds were flat at 1.15%, with five-year yields down 2.7 bps to 1.84%, 10-year yields down 5.5 bps to 2.88% and 30-year yields down 3.6 bps to 3.67%. The December 08 BAX contract was up 9824.6 ticks to 98.25.

In Germany, returns on two-year German bonds were down 6.1 bps to 1.59%, with five-year yields down 5.5 bps to 2.37%, 10-year yields down 7.1 bps to 3.13% and 30-year yields down 4.8 bps to 3.80%.

Yields on UK two-year bonds were down 10.0 bps to 1.68%, with five-year yields down 8.5 bps to 2.73%, 10-year yields down 6.5 bps to 3.22% and 30-year yields down 4.2 bps to 3.95%.

All data taken at 4:40 p.m. EST.

By Adam Button, This email address is being protected from spam bots, you need Javascript enabled to view it , edited by Sarah Sussman, This email address is being protected from spam bots, you need Javascript enabled to view it

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