Stocks wobbled Wednesday as a lot of the financial-driven steam from the prior session's rally appears to have evaporated.
Pockets of strength emerged in housing, semiconductors, retail and energy.
Homebuilders, which have taken a beating in 2007, have been among the leading gainers this year. The sector could get another boost from proposed legislation that could deliver billions of dollars to homeowners facing foreclosure.
A Reuters/Bridge index of homebuilders has jumped nearly 30 percent this year, led by gains of more than 70 percent (year to date) in shares of land developer AMREP
Even home-improvement retailers are benefiting from a turnaround, with shares of Home Depot touching $30 a share, up 20 percent from where it was a month ago. Lowe's is up about 15 percent in the past few weeks.
As for Wednesday's market action, Centex and KB Homes posted notable gains.
Micron Technology shares jumped ahead of the chip maker's earnings, due out after the closing bell.
Chip makers were up all day, even as the broader market sputtered. The Philadelphia Stock Exchange semiconductor index was up 0.8 percent.
American depositary shares of Research In Motion ticked higher ahead of the Canadian company's fourth-quarter earnings, due out after the closing bell. The company, which makes the BlackBerry e-mail device, has offered a range of 66 to 70 cents a share, but there is an abundance of optimism about RIMand analysts think earnings will come in on the top end of that range.
Apple's iPhone , while dazzling, isn't yet considered serious competition for the BlackBerry in the corporate world as it lacks security features that the BlackBerry has.
Retail stocks posted solid gains Wednesday after electronics retailer Best Buy reported its net declined but beat expectations. Same-store sales slipped 0.2 percent as a decine in U.S. sales offset strength overseas.
Energy stocks advanced, with Dow components ExxonMobil and Chevron up 2 percent and 1.5 percent, respectively. Earlier, the EIA reported that crude inventories unexpectedly roselast weekby 7.4 million barrels, more than three times the expected increase, to 319.2 million barrels.
General Motors was the top gainer on the Dow Jones Industrial Average. The auto maker a day earlier posted a 19 percent decline in March auto sales but said it expects the U.S. economy to recover in the second half. In a conference call following the monthly sales report, GM sales analyst Mike DiGiovanni said he saw "early signs" that the U.S. market was steadying.
In testimony on Capitol Hill, Federal Reserve Chairman Ben Bernanke warned that the economy may shrink in the first half of this year. He said much of the "necessary economic and financial adjustment has already taken place" but was unclear on whether the door was still ajar for further rate cuts.
The Fed chairman said he doesn't see any other investment banks suffering the same fate as Bear Stearns. In defending the central bank's decision to jump in to bail out Bear Stearns, Bernanke said the Fed felt it had no choice as the investment bank's outright collapse would've rippled through the financial sector and markets.
"Normally, the market sorts out which companies survive and which fail, and that is as it should be," Bernanke said in prepared remarks delivered to the congressional Joint Economic Committee. "However, the issues raised here extended well beyond the fate of one company." (Read the full textof Bernanke's testimony.)
Analysts are closely watching Merrill Lynch and Citigroup amid increasing nervousness about the banks' upcoming earnings reports. Analysts have lowered their forecasts for both in recent weeks.
"My concerns are that, while [financial] stocks may look cheap on a P/E basis right now, the 'E' part of the equation -- earnings -- might be falling faster than people are expecting," said Chris Orndorff, head of equity for Payden & Rygel in Los Angeles, "and therefore, stocks that appear to be cheap may, in fact, turn out to be expensive."
In the latest Wall Street job-cut news, Merrill Lynch is planning to pare 10 to 15 percent of its nonbroker work force, CNBC has learned.
Lehman Brothers announced Tuesday that it had raised $4 billion in an oversold offering. Finance chief Erin Callan told CNBC that the offering was intended to make a "strong statement" about the firm's stabilityamid growing rumors that the firm was facing the same kind of liquidity problems that brought down Bear Stearns.
“Unfortunately, we’re in a market where perception trumps reality,” Callan said. “We didn’t want to wait for it to get to a point where we were in a wholly defensive mode,” Callan said. “We felt it was necessary to make a strong statement.”
Callan also said that the SEC is investigating short-selling in the bank's stock.
Among regional banks, Ohio's National City, which has been battered by the housing downturn, is considering a plan to sell itself to local rival KeyCorp , according to the Wall Street Journal.
But Punk Ziegel analyst Richard Bove raised concerns about the viability of a deal involving National City. In a note to clients, the analyst pointed out that 1) KeyCorp is the smaller of the two and 2) National City would have to take a significant write-off to clean up its balance sheet for any potential sale. Bove cut his price target on National City to $10.50 from $18.50.
Fannie Mae , the largest U.S. home funding company, told lenders this week that it will now require a minimum credit score of 580 for most loans, according to a report in the Wall Street Journal.
Shares of Thornburg Mortgage skidded after RBC Capital cut its price target on the stock to 50 cents from $1. The Wall Street Journal reported that Thornburg plans to resume making loans "within weeks if not days" after narrowly averting bankruptcy.
Before the opening bell, ADP Employer Services reported that 8,000 jobs were added to private-sector payrollsin March, compared with February's revised decline of 18,000. Separate reports showed planned layoffs by U.S. companies fell 26 percent in March from the prior month, and mortgage applications plunged last week.
The ADP report comes ahead of Friday's employment report from the Labor Department. The consensus is for nonfarm payrolls to have dropped by 60,000, following a 63,000 decline in February, and for the unemployment rate to tick up to 5 percent from 4.8 percent.
In midmorning economic news, factory orders fell 1.3 percent, more than expected, in February after a 2.5 percent drop in January, the Commerce Department reported.
In other earnings news, agriculture giant Monsanto reported its fiscal second-quarter profit soared but its outlook range -- now $3.15 to $3.25 a share -- began to slide below analysts' expectations.
Still to Come:
WEDNESDAY: Research In Motion and Micron Technology earnings after the closing bell
THURSDAY:Jobless claims; ISM services index; Bernanke testifies; Fed's Yellen speaks
FRIDAY: Jobs report
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