Housing deal, hope for insurers lift stocks

NEW YORK -- Insurance and technology shares led the market higher in a volatile day Wednesday, breaking a two-day slide. But a dim view of the economy from the Federal Reserve and jitters over looming earnings reports kept buyers in check.

The Dow Jones industrials rose 47.55, or 0.6 percent, to 7,837.11.

Stocks got an early lift from a deal combining two major homebuilders and a report saying the government was poised to extend aid to battered life insurance companies, then wavered throughout the day before ending slightly higher.

The Dow had fallen 3 percent over Monday and Tuesday, which analysts saw as a necessary breather following a rally in March that gave the Dow its biggest four-week surge since 1933.

Market-watchers say the rally could still continue, but only if corporate earnings reports just now starting to roll out provide encouraging forecasts about where the economy is going -- something that's far from certain.

"We're braced for a lousy earnings season because we haven't had a lot of guidance," said Frederic H. Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Ore., referring to company's opaque forecasts to start the year. "We're in a volatile bottoming process."

In other trading, the Standard & Poor's 500 index rose 9.61, or 1.2 percent, to 825.16, and the Nasdaq composite index rose 29.05, or 1.9 percent, to 1,590.66.

Traders jumped on some glimmers of hope that emerged from the homebuilding, tech and insurance industries.

A $1.3 billion deal between Pulte Homes Inc. and rival Centex Corp. will create the nation's largest homebuilder. Centex jumped 18.9 percent, while Pulte fell 10.5 percent. Other homebuilders were mixed.

Insurers jumped following a report in The Wall Street Journal that the government may soon provide rescue funds to the ailing life insurance industry. An announcement could come within the next few days, the Journal said. Life insurers have been hit hard by investment losses this past year.

MetLife Inc. rose 2.4 percent, Prudential Financial Corp. gained 7.7 percent and Hartford Financial Services Group Inc. added 13.5 percent.

Technology stocks showed some of the biggest advances following an encouraging forecast from Juniper Networks Inc. The maker of equipment for computer networks said its first-quarter earnings should meet forecasts even as sales will likely fall short of expectations. Its shares jumped 12 percent.

Cisco Systems Inc. added 1.7 percent, while Microsoft Corp. gained 2.3 percent.

Some corporate news weighed on parts of the market. Ryder System Inc. tumbled 18 percent after the truck leasing and logistics company lowered its first-quarter earnings projection. The company said the weak economy had eroded demand.

An analysts' assessment of Bank of America Corp. corralled most financial stocks. The Oppenheimer & Co. report, which the company disagreed with, predicted Bank of America will have to raise an additional $36.6 billion in capital. The stock lost 4.1 percent. It was the steepest slide among the 30 stocks that make up the Dow industrials.

Some investors were hopeful that regulators would soon move to curb short-selling, in which traders try to profit from a stock's decline by selling borrowed shares and buying them back at a lower price. SEC commissioners voted Wednesday to open certain proposals to public debate. Supporters say it could lead to more stability in the market.

The day brought mixed economic news. The Commerce Department said wholesalers trimmed their inventories in February by the steepest amount in more than 17 years. But sales rose for the first time since the summer. The data signaled that companies could be getting their inventories under control.

Federal Reserve policymakers, faced with the danger of a worsening recession, decided at their mid-March meeting to funnel $1.2 trillion into the economy. Minutes from the gathering released Wednesday revealed growing concerns about a vicious economic cycle in which rising unemployment would curtail consumer spending, potentially into 2010.

Stocks bounced off 12-year lows in early March, surging more than 20 percent in just four weeks as signs emerged that the economy might be regaining its footing. There have been a couple of pauses in the rally -- including the drops Monday and Tuesday -- that analysts welcome as evidence that traders are avoiding becoming euphoric over the prospects for a quick recovery in the economy.

In other trading Wednesday, the Russell 2000 index of smaller companies rose 10.42, or 2.4 percent, to 442.12.

About three stocks rose for every one that fell on the New York Stock Exchange where consolidated volume came to 5.07 billion shares compared with 5 billion shares traded Tuesday. Volume has been light this week because markets will be closed for Good Friday.

Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.86 percent from 2.90 percent late Tuesday.

The dollar showed some strength against other major currencies. That held gold to a moderate gain.

Light, sweet crude rose 23 cents to settle at $49.38 a barrel on the New York Mercantile Exchange.

Overseas, Britain's FTSE 100 slipped 0.1 percent, Germany's DAX index rose 0.8 percent and France's CAC-40 rose 0.7 percent. Japan's Nikkei stock average fell 2.7 percent.