Gains by technology stocks and a partial rebound in financial shares pulled the market higher after fears about the banking system pummeled Wall Street on Tuesday. Quarterly results and forecasts from PNC Financial Services Group Inc. and Bank of New York Mellon eased concerns that the troubles at financial giants like Citigroup Inc. were hitting all banks.
Some bounce would have been expected following a sell-off but a better-than-expected 2009 forecast from IBM Corp. left technology shares looking not just oversold but as relatively safe bargains for some investors. Energy stocks also advanced as oil gained.
IBM said late Tuesday it expects its earnings for the new year to come in well above what analysts had been expecting and that its fourth-quarter profit jumped 12 percent, easily topping analysts' estimates. Swedish wireless equipment maker LM Ericsson also reported earnings that beat forecasts.
PNC, which acquired National City Corp. on Dec. 31, jumped 21 percent after posting a loss for the fourth quarter but said it would turn in a profit for 2008. And Bank of New York Mellon Corp. rose 15 percent after reporting that it managed to eek out a profit for the fourth quarter.
Not all industries shared in the day's advance. Airlines were weak after American Airlines and United Airlines posted lackluster results. Typical safe-havens for weak economies, like utilities and makers of consumer staples, fell as investors shifted money into harder-hit areas to look for deals.
There was also somber news on the outlook for the housing industry. A key gauge of homebuilders' confidence, sank to a new low this month. The National Association of Home Builders/Wells Fargo housing market index released Wednesday afternoon dropped one point to 8 in January. The index was at 9 for the previous two months.
Earnings reports commanded the market's focus Wednesday and will do so for the next few weeks. Apple Inc. is set to report its fiscal first-quarter results after the market closes.
Kim Caughey, equity research analyst at Fort Pitt Capital Group, said the results from IBM and some of the banks were a reminder that while it's a difficult time for businesses, not all are struggling as much as some financial names.
"It was a great reminder that businesses still have their lights on, their doors open and that they're making money," she said.
Beyond earnings, investors are looking for insights into what steps the new administration will take to shore up the economy. President Barack Obama's Treasury Secretary nominee, Timothy Geithner, was on Capitol Hill for his Senate confirmation hearing. He asked Congress to act quickly and forcefully to deal with financial crisis and said Obama is working to foster economic recovery and "get credit flowing again."
In early afternoon trading, the Dow Jones industrial average rose 102.03, or 1.28 percent, to 8,051.12 after being up as much as 160 points early in the session.
Broader stock indicators also gained. The Standard & Poor's 500 index advanced 12.97, or 1.61 percent, to 818.19, and the Nasdaq composite index rose 23.78, or 1.65 percent, to 1,464.64.
The Russell 2000 index of smaller companies rose 6.47, or 1.49 percent, to 440.12.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 804.8 million shares.
Bond prices fell as stocks rebounded. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.42 percent from 2.37 percent late Tuesday. The yield on the three-month T-bill, in demand because it is considered one of the safest investments, rose to 0.12 percent from 0.10 percent late Tuesday.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude rose 80 cents to $41.64 a barrel on the New York Mercantile Exchange.
Stocks fell sharply Tuesday on worries governments would be forced to take over wobbly banks to avoid their collapse. The Dow dropped lost 332 points, or 4 percent. It was the first time the blue chips closed below 8,000 since November.
The Royal Bank of Scotland alarmed investors around the world this week with the warning its 2008 loss might top $41 billion. That spurred the British government to announce a fresh banking bailout. In the U.S., State Street Corp. - seen as one of the safer financial firms during the current turmoil because it is a custodial bank - lost more than half its value Tuesday after reporting its profits plunged and issuing a bleak forecast for 2009.
Citigroup and Bank of America Corp., which at the end of last week reported multibillion dollar fourth-quarter losses, each plunged by more than 20 percent on Tuesday. U.S. markets were closed Monday for Dr. Martin Luther King Jr. Day.
The slide in financial stocks came as investors factored in the possibility of insolvency, said Rob Lutts, president and chief investment officer of Cabot Money Management. Investors have also been pricing in expected capital infusions that will lower the value of the common stock that shareholders own.
Lutts said even banks that had been seen as relatively stronger, such as JPMorgan Chase & Co. and Wells Fargo & Co., are facing large write-downs on investments that will require more capital.
Tech shares outpaced the broader market Wednesday. IBM rose $7.55, or 9.2 percent, to $89.53.
Among bank stocks, PNC jumped $4.67, or 21 percent, to $26.67, while Bank of New York Mellon rose $2.74, or 15 percent, to $21.50.
Citigroup rose 37 cents, or 13 percent, to $3.17, and Bank of America rose 64 cents, or 12.5 percent, to $5.74. Royal Bank of Scotland advanced 20 cents, or 6 percent, to $3.53, and State Street rose $1.38, or 9.3 percent, to $16.27.
JPMorgan rose $2.10, or 12 percent, to $20.19, and Wells Fargo advanced 49 cents, or 3.4 percent, to $14.72.
American Airlines' parent AMR Corp. tumbled $2.32, or 22 percent, to $8.14, while UAL Corp.'s United Airlines fell $1.01, or 8.7 percent, to $10.61.
Energy stocks rose. Occidental Petroleum rose $3.42, or 6.7 percent, to $54.30.
Overseas, Japan's Nikkei stock average fell 2.04 percent. Britain's FTSE 100 fell 1.10 percent, Germany's DAX index rose 0.50 percent, and France's CAC-40 fell 0.67 percent.