Stocks closed lower after another volatile day of trading amid weak earnings from Intel and continued concerns over the economy.
Intel's earnings were the primary market mover for the day, but banks showed signs of a comeback even though JP Morgan turned in earnings that missed estimates, pushing financial stocks broadly higher.
JP Morgan stock moved up sharply as did most other companies in the sector. Citigroup , still weighed by its own earnings and the resulting slashed dividend, was one of the few in the sector to post a loss.
JP Morgan's performance was another example of investors' willingness to reward transparency, even when the news is bad. Financials have been hammered by losses from bad subprime mortgage bets, and those with the least exposure and most transparency have been rewarded.
"The earnings picture over the next six months is going to be very, very important, not so much about how the companies are doing but their clarity," said Nadav Baum, managing director of investments for Pittsburgh-based BPU Investment Management. "That was the classic case with JP Morgan. They missed their earnings target but their stock went up."
Still, troubled bond insurer Ambac Financial tumbled after it slashed its quarterly dividend and announced plans to raise $1 billion of new capital. The company also named an interim chief executive as it scrambles to maintain a triple-A credit rating.
Investors also took cheer from talk later in the trading day that Congress was nearing passage of a stimulus package.
Economic dataon inflation released earlier in the day renewed fears over the direction of the economy, and recession-proof stocks came even more into vogue. Retail stocks also did well on the day, with JC Penney leading the way, as commodity prices fell.
"We are in a recession. It's not like we're going into one -- we're in one," Baum said. "That's why you're starting to see biotechs and drug stocks do better, because they're recession-proof."
Tech Takes a Beating
Intel said after the bell Tuesday that its earnings per share of 38 cents missed analyst estimates of 40 cents per share, and the stock suffered all day, bringing many others in the tech sector with it.
Apple continued to slide after investors were unimpressed with news coming out of the company's Macworld trade show, and shares also were down at Dell and Hewlett-Packard .
In housing, the Mortgage Bankers Association said mortgage applications were up sharplylast week, to their highest level in nearly four years, as borrowers took advantage of plunging interest rates.
The news sparked a positive day for homebuilders. Shares gained sharply at Hovnanian , which has seen its stock price tumble about 83 percent in the past year.
In the biggest deal of the day, business software maker BEA Systems agreed to be acquired by Oracle in an all-cash $8.5 billion deal, representing $19.375 per share. BEA was one of the most actively traded stocks Wednesday and among the market's biggest gainers.
In aerospace, Boeing said the delay of its Dreamliner airplanes will not have a material effect on its financial picture, and shares edged up.
And AMR, parent of No. 1 U.S. carrier American Airlines, posted a wider net loss for the fourth quarter, plagued by record high fuel costs and foul weather.