Wall Street clawed back from steep losses in a wild session Wednesday. Stocks finished higher as investors looked past subprime lending worries and weakness in overseas markets amid a pair of favorable economic reports. Strength in energy- and software-related shares helped boost major indexes.
A massive midsession sell program was followed quickly by short covering and heavy buying, as traders positioned for quadruple witching, the trader's term for when the monthly stock and index option expirations coincide with the quarterly expiration of stock and index futures contracts, says Standard & Poor's Equity Research.
On Wednesday, the Dow Jones industrial average rose 57.2 points, or 0.47%, to 12,133.16, after tumbling below 12,000 earlier in the session for the first time since November. Microsoft (MSFT) paced the blue-chip benchmark higher. The broader Standard & Poor's 500 index added 9.22 points, or 0.67%, to 1,387.17. The tech-heavy Nasdaq composite climbed 21.17 points, or 0.9%, to 2,371.74. (Market action for each index can be viewed by clicking on the accompanying images.)
NYSE breadth was positive, with 20 issues advancing for every 13 declining. Nasdaq breadth was 17-14 positive.
Subprime lenders' troubles may be part of a broader liquidity crunch, some analysts say. "There is kind of a threat to global liquidity," says Roger Nusbaum, a portfolio manager with Your Source Financial. "Subprime clearly is a piece of the puzzle, but I think what's going on with the yen carry trade potentially stands to be a bigger piece of the puzzle."
The market could be re-testing recent lows, technical analysts say. "A defensive turn into consumer staples sector is to be expected," notes Roger Volz, chief technical analyst at Swiss American Securities.
Other warn the decline might not have hit bottom yet. "Investors should remain alert to the market's actions over the next couple of days as indications of whether or not to take further defensive action or to be ready to buy," observes Richard Dickson, senior market strategist for Lowry's Reports.
In economic news Wednesday, the U.S. current account deficit narrowed to $195.8 billion in the fourth quarter of 2006, below expectations, from a revised $229.4 billion three months earlier.
U.S. import prices inched higher 0.2% in February alongside a 0.7% gain for export prices. The report was "not as hot as expected," says Action Economics.
The economic calendar Thursday brings closely watched inflation data. The producer price index, or PPI, is expected to show a 0.5% headline rise and a 0.2% increase excluding food and energy, says S&P.
Among Wednesday's stocks in the news, General Motors (GM) was lower after the automaker reported a fourth-quarter profit of $950 million, shy of Wall Street expectations.
Lehman Brothers (LEH) was lower despite posting a record first-quarter profit, on the heels of a record earnings report at fellow investment bank Goldman Sachs (GS) a day earlier.
Goldman was higher amid reports the company is looking to buy a subprime mortgage lender on the cheap.
Outside of earnings, H&R Block (HRB) edged higher, recovering from an early slide after the tax preparer delayed filing its quarterly report, citing a needed write-down in subprime mortgage lending unit Option One.
On the M&A front, Citigroup (C) said it will begin a tender offer for Nikko Cordial on Thursday after sharply raising its bid for the Japan-based brokerage.
In analyst calls, Qualcomm (QCOM) was higher after J.P. Morgan upgraded the telecommunications company from underweight to neutral.
Shares of Southwest Airlines (LUV) gained after HSBC upgraded the stock from neutral to overweight.
Elsewhere, China-based Internet search provider Baidu.com (BIDU) was lower after a report by China Intelliconsulting suggested click fraud could limit revenue growth.
In the energy markets, April West Texas Intermediate crude oil futures rose 23 cents to $58.16 a barrel after a weekly inventory report showed a slightly smaller-than-expected increase in crude supplies. Focus now turns to Thursday's OPEC meeting.
European markets finished sharply lower. The FTSE-100 index in London fell 160.5 points, or 2.61%, to 6,000.7. Germany's DAX index dropped 176.29 points, or 2.66%, to 6,447.7. In Paris, the CAC 40 index was down 136.72 points, or 2.52%, to 5,296.22.
Asian markets ended heavily lower. In Japan, the Nikkei 225 index tumbled 501.95 points, or 2.92%, to 16,676.89. In Hong Kong, the Hang Seng index slid 496.21 points, or 2.57%, to 18,836.93. Korea's Kospi index skidded 28.68 points, or 2%, to 1,407.37.
Treasury prices dipped, erasing early gains amid a drop in the yen's value. The 10-year note fell in price 10/32 to 100-26/32 for a yield of 4.52%, while 30-year bonds dropped to 100-29/32 for a yield of 4.69%. "Yen weakness alleviated concerns that institutions were unwinding carry trades," says S&P.