Stocks closed higher as a rally in technology shares helped offset more uncertainty in the credit markets and troubling economic signs.
Investors weighed downbeat economic reports, including one showing a higher-than-expected rise in first-time unemployment claims and another off a survey of mid-Atlantic manufacturing by the Philadelphia Federal Reserve Bank that unexpectedly showed activity contracting.
But tech shares boosted the Nasdaq, with Oracle, Qualcomm and Apple leading the way.
"Technology is doing well, helped by Oracle," Steve Goldman, market strategist at Weeden & Co, based in Greenwich, Conn., told Reuters. "And while we have seen further credit repercussions, we are in a strong seasonal period where the market tends to be more forgiving."
Earnings reports set the direction for stocks, none more significant than Wall Street bellwether Bear Stearns, which like others in the sector has been hit hard by the subprime collapse and subsequent credit squeeze.
Bear reported a net loss of $854 million, or $6.90 a share, for the quarter ended Nov. 30. That compared with a year-ago profit of $563 million, or $4 a share and represented the firm's first-ever quarterly loss since it became a publicly traded company.
Another financial, MBIA , saw its shares tumble after the bond insurer said it had $30.6 billion in exposure to collateralized debt obligations (CDOs) that it insures, and another $8.1 billion in exposure to CDOs backed by high-grade collateral, known as CDOs-squared.
"We are shocked that management withheld this information for as long as it did," said a report from Morgan Stanley, referring to the CDO-squared exposure.
The bad news at MBIA and Bear Stearns lifted Treasurys, which benefited from a flight to safety over fears that the credit crisis is far from over.
Tech Keeps Market Afloat
On the plus side, shares of both software maker Oracle and footwear giant Nike moved sharply higher following healthy sales increases which handily beat Wall Street expectations after the bellWednesday.
And Qualcomm shares moved to the upside after the wireless chip and technology developer raised its outlook.
Both RiteAid Pharmacy and FedEx reported a drop in third-quarter profit, sending shares at both companies down.
Punctuating the effect financials have had on the market, Citigroup led the Dow and S&P laggards, while tech leaders International Business Machines and Apple topped the blue-chip index.
Also in the financials, SunTrust Banks, the nation's seventh-largest lender, said it will take up to $400 million in fourth-quarter pretax write-downs mainly from a bailout of two money market funds. The move sent shares to a four-year low. And government-backed student loan lender Sallie Mae saw its shares tumble again, the day after a contentious analysts teleconference with CEO Albert L. Lord. The agency said today it is shifting $1.6 billion in derivatives to Citi.
Retailers showed signs of life as the holiday shopping season wound to a close, with small-cap Pier 1 Imports seeing its shares skyrocket on higher quarterly earnings.