Stocks end higher after zigzagging By TIM PARADIS, AP Business Writer

Stocks end higher after zigzagging By TIM PARADIS, AP Business Writer
1 hour, 35 minutes ago



NEW YORK - Wall Street shot higher in a last-minute advance Wednesday after careening through a session made turbulent by ongoing concerns about U.S. home loans and the credit market.

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Stocks zigzagged for much of the day, with the Dow Jones industrials moving from positive to negative territory and back again before rallying to a gain of 150 points on bargain hunting during the last 20 minutes of trading. It was clear that any advance could be punctured by further bad news about soured subprime home loans, those made to borrowers with poor credit.

Wednesday's trading further revealed the fractious nature of the stock market after a series of triple-digit swings in the Dow over the past week. On Tuesday, Wall Street gave back a big early gain and resumed the sharp slide it began last week, as concerns about home loan defaults and their fallout re-emerged when American Home Mortgage Investment Corp. reported troubles with its credit lines.

Economic news — including a better-than-expected report on pending home sales — as well as record oil prices failed to peel investors' concentration much beyond credit.

"We've got a tug-of-war going on," said Arthur Hogan, chief market analyst at Jefferies & Co. He contends Wednesday's trading represents a microcosm of the market's performance in recent weeks, when investors alternately focus on concerns like subprime loans and rising energy prices and positives like low unemployment, low interest rates and still-growing corporate profits.

The Dow rose 150.38, or 1.14 percent, to 13,362.37.

Broader stock indicators also advanced. The Standard & Poor's 500 index rose 10.54, or 0.72 percent, to 1,465.81, and the Nasdaq composite index rose 7.60, or 0.30 percent, to 2,553.87.

Investors in recent sessions have succumbed to concerns about the credit markets that have dogged them for months. Stocks plunged at the end of last week amid such worries, taking the Dow down 585 points over Thursday and Friday.

Hogan said the market's sell-off since its July 19 high — when the Dow closed above 14,000 for the first time — has at times drawn out some bargain hunters, as occurred late Wednesday. In an about-face from recent sessions, a crush of sell orders didn't arrive late in the day to drive stocks down in the final minutes.

"We've got that dichotomy between fear and greed. This is greed kicking in," he said of the rush of last-minute buy orders.

"You get to a point where are you more afraid of the fallout from credit spreads or are you more afraid of missing the market bottom?," he said of investor sentiment. "I think it's going to be a recurring pattern over the next several weeks," Hogan said of Wednesday's volatility.

Peter Dunay, an investment strategist with New York-based Leeb Capital Management, contends hedge funds are likely to pounce once they determine the market has bottomed out.

"This was hedge fund buying, they are the only investors that would do this at the end of the day," he said.

The surge also likely reflects the work of computers, which handle much of the trading in the stock markets, and execute transactions when stocks hit specific levels.

Bond prices, which move opposite yields, fell as stocks rallied. The yield on the benchmark 10-year Treasury note rose to 4.79 percent from 4.75 percent late Tuesday.

Besides the weak home loan market and credit worries, investors are facing concerns over the threat of inflation due to record-high crude oil prices.

Light, sweet crude fell $1.68 to $76.53 per barrel on the New York Mercantile Exchange after rising to a new all-time high of $78.77 during the session after the government reported a drop in inventories. The previous trading high of $78.40 came in July 2006; on Tuesday crude had its first record close in more than a year.

The dollar was mixed against other major currencies, while gold prices fell.

Among the forces weighing on stocks was another slump in financial services stocks, especially after Bear Stearns Cos. said it moved late Tuesday to prevent investors from pulling money out of a third hedge fund, which had $850 million invested in highly rated mortgage-backed securities.

A week ago, the company riled the markets when it said two hedge funds that bet on risky home loans were essentially worthless — and declared bankruptcy for both on Tuesday. Bear fell $2.92, or 2.4 percent, to $118.30.

In economic news, a report from the National Association of Realtors found that pending sales of existing homes rose 5 percent in June from a month earlier. It was the largest monthly gain in more than three years. In addition, the Institute for Supply Management said its manufacturing index rose to 53.8 in July from 56.0 in June. The reading, while showing an improvement in the manufacturing sector, was weaker than the 55.0 analysts expected.

"The economic data were a modest negative but I don't think that economic data has been driving the markets as much as changes in perceptions in risk in private equity and mortgage-related investments," said Alan Levenson, chief economist at T. Rowe Price.

In corporate news, Dow Jones & Co., publisher of The Wall Street Journal, confirmed it struck a deal to be acquired by Rupert Murdoch's media conglomerate News Corp. for $5 billion. Dow Jones rose 72 cents to $58.10, while News Corp. rose 16 cents to $22.82.

Corporate earnings reports offered investors a mixed picture on Wednesday. Time Warner Inc. saw strength in its cable TV business help boost second-quarter earnings by 5 percent. However, investors grew concerned after its AOL Internet unit saw a 38 percent decline in revenue. Time Warner fell 62 cents, or 3.2 percent, to $18.64.

Arcelor Mittal, the world's largest steelmaker, posted a $2.72 billion profit in the second quarter. That compares with earnings of $1.82 billion a year ago, based on the combined results of the company's predecessors, Mittal Steel Co. NV and Arcelor SA. Although Mittal expects to complete its takeover later this year, the companies largely operate as a combined entity. The stock rose $4.29, or 7 percent, to $65.31.

Despite gains by the major market indexes, declining issues outnumbered advancers by more than 9-to-7 on the New York Stock Exchange, where consolidated volume came to a heavy 4.93 billion shares compared with 4.18 billion traded Tuesday.

The Russell 2000 index of smaller companies rose 1.80, or 0.23 percent, to 777.92.

Worries about U.S. home loan defaults haven't affected only the U.S. markets; they have been rippling through the world markets, too.

In Asian trading, Japan's Nikkei stock average fell 2.2 percent, Hong Kong's Hang Seng index dropped 3.2 percent, and China's Shanghai Composite Index dipped 3.8 percent.

Britain's FTSE 100 fell 1.72 percent, Germany's DAX index fell 1.45 percent, and France's CAC-40 fell 1.68 percent.

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