Stocks turn higher as investors hunt for bargains

Wall Street turned higher in erratic trading Thursday as investors, while still nervous about growing signs of a weakening economy, picked up bargains from stocks that were beaten down in a two-day selloff. The Dow Jones industrial average rose 180 points and outpaced the gains of other major indexes as energy stocks bounced higher from a drop in oil.

There was little confidence behind the buying; investors were attracted to stocks that were pummeled in two days of selling that sliced nearly 750 points off the Dow. There is a growing belief on the Street that the economy is either in a recession or headed for one despite government relief efforts and gradual improvements in world credit markets.

With its move higher, Wall Street is living up to predictions that trading will remain volatile for some time to come as investors try to test whether the market has formed a bottom.

"It's people coming in that see tremendous value, but for a more sustainable advance I think we need more time," said Steven Goldman, chief market strategist at Weeden & Co. in Greenwich, Conn.

Wall Street digested a rush of corporate news. Goldman Sachs Group Inc. is preparing to cut about 10 percent of its work force, according to a person briefed on the plan who requested anonymity because the company hadn't publicly disclosed details of the plan.

Meanwhile, drugmaker Eli Lilly and Co. said it booked a loss for the third quarter on a charge of almost $1.5 billion for an expected settlement of an investigation into the marketing of its top-selling drug, Zyprexa. Dow Chemical Co. said its quarterly profit rose 6 percent, helped by price hikes that offset a nearly 50 percent increase in raw materials and energy costs.

A snapshot of the labor market signaled that it continues to weaken. The Labor Department reported Thursday that new applications for unemployment benefits rose 15,000 last week to a seasonally adjusted 478,000. That was slightly above analysts' estimates of 470,000. Jobless claims above 400,000 are considered a sign of recession. A year ago, claims stood at 333,000, the department said. Analysts caution, however, that the weekly readings can be volatile.

Investors viewed the data as more evidence that the financial crisis is battering the economy and forcing companies to cut back. Market anxiety was already high as investors sift through a batch of corporate forecasts that has stirred intense unease about the health of the global economy.

Thomas J. Lee, U.S. equities strategist at JPMorgan Chase & Co. in New York, cautioned that the market will need to rein in its sharp swings before some investors will feel confident enough to return.

"I don't think anyone can buy and sell stocks right now with conviction," he said.

The Dow rose 182.47, or 2.14 percent, to 8,701.68 after earlier falling 125 and rising more than 277. On Wednesday, the Dow lost 514 points as investors worried that the global economy is poised to weaken. That was on top of a 231-point loss Tuesday.

Broader stock indicators also rose after showing early declines. The Standard & Poor's 500 index advanced 15.35, or 1.71 percent, to 912.13, and the Nasdaq composite index rose 4.55, or 0.28 percent, to 1,620.30.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 460.5 million shares.

Credit markets continued to show signs of slow improvement, although figures released Thursday suggested a return to more normal market conditions will take time. The rate on three-month loans in dollars -- known as the London Interbank Offered Rate, or Libor -- was unchanged at 3.54 percent. The rate fell to that level on Wednesday and is the lowest since Sept. 24.

Demand for short-term Treasury bills, regarded as the safest assets around, was little changed. The three-month Treasury bill yielded 1 percent, down from 1.01 percent late Wednesday. The levels are a notable improvement from the 0.20 percent seen last week, when investors were willing to trade the slimmest of returns for a safe place to keep their money.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.65 percent from 3.60 percent late Wednesday.

The dollar was mixed against rival currencies after jumping to multiyear highs Wednesday, while gold prices fell.

Light, sweet crude rose $1.73 to $68.48 on the New York Mercantile Exchange. The contract on Wednesday fell to a new 16-month low as big increases in U.S. crude and gasoline stocks fed beliefs that the economic downturn is eroding demand for energy.

The rise in oil gave a lift to energy companies and helped ease some worries about the economy, according to Ryan Larson, head of equity trading at Voyageur Asset Management, a subsidiary of RBC Dain Rauscher in Chicago. While the stock market often cheers a drop in oil, recent declines have worried some investors that they portended a falloff in economic activity.

"You're seeing a connection between oil and the markets, and we're seeing a bounce," Larson said. "The market is thinking maybe the slowdown might not be as imminent as we first thought, or maybe its priced into the market."

Oil fell Wednesday to its lowest level in 16 months, hurting energy stocks. But the rebound sent them higher Thursday. Exxon Mobil Corp. rose $3.82, or 5.9 percent, to $68.39, while Chevron Corp. advanced $3.77, or 6.1 percent, to $65.51.

Goldman Sachs fell $7, or 6.1 percent, to $107.71. Eli Lilly rose $1.30, or 4.1 percent, to $33.41, while Dow Chemical rose $1.65, or 7.5 percent, to $23.76.

The Russell 2000 index of smaller companies fell 1.80, or 0.36 percent, to 500.17.

Overseas, Japan's Nikkei stock average fell 2.46 percent. Britain's FTSE 100 fell 0.25 percent, Germany's DAX index fell 1.50 percent, and France's CAC-40 lost 1.57 percent.

Asia stocks fall on profit fears

Asian stocks fell Thursday, with South Korea's market sinking more than 7 percent, as a barrage of downbeat company forecasts deepened fears of a global recession.

"Sentiment is lousy," said Dariusz Kowalczyk, chief investment strategist at CFC Seymour in Hong Kong. "Earnings are disappointing, and we're still in the process of lowering profits all across the globe."

South Korea's market was hit hardest. The benchmark Kospi fell nearly 10 percent at one point and closed down 7.5 percent at 1,049.71. Hong Kong's Hang Seng Index fell 3.6 percent to 13,760.49 after falling more than 6 percent earlier.

Japan's Nikkei 225 stock average tumbled 7 percent at the open but recovered some to closed down 2.5 percent at 8,460.98. Traders said the turnaround in Tokyo was partly due a Wall Street Journal report that the Bush administration is considering a $40 billion plan to help limit home foreclosures.

Asia's downward lurch followed Wall Street as hundreds of companies reported third-quarter results and issued murky forecasts this week, signs that the economic slowdown was taking a toll on balance sheets despite recent improvements in the world credit markets.

Tokyo investors were cautious ahead of the release of corporate earnings next week, including Canon Inc. on Monday and Honda on Tuesday.

Japanese electronics powerhouse NEC Corp. plunged 8.5 percent after slashing its full-year earnings estimates Wednesday, blaming weaker demand for mobile phones and computer chips.

"The new numbers are below even our forecasts, which were at the bottom end of market estimates," said Takeo Miyamoto, an analyst at Deutsche Securities in Tokyo, in a report Thursday. "We predict strong disappointment in the market."

Australia's key index pulled back more than 4 percent as slumping world commodity prices sent resource companies lower. Rio Tinto fell more than 14 percent while rival BHP Billiton sank more than 9 percent.

"The markets really seem to be pricing in a slowdown in growth across the globe, and that's really hurting base metals," said Matthew Lewis, a senior dealer at CMC Markets in Sydney.

Overnight in New York, the Dow fell 514.45, or 5.69 percent, to 8,519.21, after being down as much as 698 points in the final half-hour of trading. The Standard & Poor's 500 index was the worst performer among the major indexes with a 6.1 percent drop that left it at its lowest level since April 2003.

Oil rebounded modestly after plummeting more than $5 overnight to near 16-month lows. In Asian trade, light, sweet crude for December delivery rose $1.35 to $68.10 a barrel.

South Korea's currency, meanwhile, slid further Thursday amid heavy selling of stocks by foreign investors, falling 3.3 percent against the dollar to 1,404,80. The won, one of the world's worst performing currencies, has fallen 33.6 percent this year, according to the Bank of Korea.

Japanese exporters were also battered by the surging yen against the dollar and euro. A stronger yen decreased the value of overseas profits when repatriated to Japan. The dollar was little changed at 97.79 yen from 97.70 late Wednesday in New York, while the euro was trading at 125.69 yen.

In two months, the yen has gained more than 10 percent against the dollar and more than 20 percent versus the euro. The euro is at its weakest level against the Japanese currency since January 2003.

Mazda Motor Corp. plummeted 10.9 percent, Isuzu Motors Ltd. 9.6 percent, and Honda Motor Co. fell 6.6 percent. Game console maker Nintendo Co., which releases earnings Oct. 30, closed 8.65 percent lower.