Stocks coasted to a positive finish, fueled by better-than-expected sales from General Motors, short covering and a pop in a manufacturing gauge, in what was a rollercoaster start to the first half.
The Dow industrials gained 0.3 percent, closing at 11382.26, about 50 points above bear-market territory. The S&P 500 gained 0.4 percent and the Nasdaq advanced 0.5 percent.
The market lived up to its statistical expectations, with the Dow logging its 16th July 1st gain of the past 19 years. Still, it was the third straight day that the blue-chip index wandered into bear-market territory, defined as 20 percent below its October high.
The day was loaded with twists and turns.
The Dow industrials plunged into bear-market territory straight out of the gate, then got a boost after the Institute for Supply Management's gauge of manufacturing activity popped above the key 50 mark-- which indicates growth -- in June, snapping four months of contraction.
The market dropped off again after Ford reported its sales plunged 19 percentin June as sales of its best-selling F-series pickup truck were cut by 41 percent and SUV sales dropped by more than half.
But a surprising sales report from General Motors propelled GM shares as much as 15 percent, which in turn helped push all three major indexes into positive territory.
GM's sales fell 8.3 percent on an adjusted basis, a much smaller decline than the 19-percent drop expected, helped by a month-end clearance sale. And, the answer investors have been waiting for was finally answered: GM held its lead over Toyota, selling 265,937 vehicles during the month, compared with Toyota's 193,234.
(CNBC reports sales figures on an adjusted basis accounting for the number of selling days in the most recent month compared with the year prior. There were 24 selling days in June, compared with 27 days a year earlier.)
Ford shares gained 2.1 percent, while GM ended up 2.2 percent after a wild day of trading that saw GM shares swing in a 25-percent range.
U.S. sales at Toyota fell 12 percent while sales at Honda, which has the most fuel-efficient lineup, climbed 14 percent.
Today's gyrations follow the worst first-half of the year since the first half of 1970 on Monday.
In the meantime, a lot of strategists say the best play is to short the market.
"What the charts are telling you is be short this market because there's still a problem," said Ralph Parks, president of Ralph Parks Investment Group in Rochester, NY. "Right now, it's four-to-one on the short side," Parks said, referring to technical market indicators.
What's holding the market back, Parks explained, is that the economy is imbalanced right now and the Fed's hands are tied from raising rates to curb inflation because it's an election year.
There was some buying, as is typical at the start of a quarter, but many investors are holding off in anticipation of earnings season, which kicks off a week from today with Alcoa .
"The earnings projections for next year are oustanding but they keep on coming down," Parks explains, just as they did for this year. "They keep creeping down and creeping down," he says.
"That's what's keeping this market down," Parks says. "If profits don't grow, stocks don't grow."
Light, sweet crude rose nearly a dollar, settling at $140.97 a barrel. Earlier, crude had pushed above $143 a barrel.
Disputes over what's causing the spike in oil prices continued with billionaire investor Wilbur Ross telling CNBC that the dramatic rise in the price is a bubbleand there is no apparent problem with the supply of crude.
But the heads of major oil companies countered the statements that speculation was driving the price, saying supply was a problem.
Beaten-down financials rose 1 percent, making them the best performer among 10 key S&P sector indexes.
survived another round of rumors. Watching the investment bank struggle under the attack of short sellers and rumor mongers has felt a little like watching the National Geographic Channel. Already beaten down, the stock tumbled 11 percent on Monday amid rumors that the brokerage would face an inevitable sale a la Bear Stearns. But shares rebounded 5.8 percent today, trading at nearly $21 a share, after Morgan Stanley recommended late Monday that investors buy Lehman shares and slapped a $31 price target on the stock.
Among the few brave souls to recommend buying into financials these days, one name that comes up repeatedly is JPMorgan Chase. And, the proof was in the numbers: JPM led Wall Street in underwriting in the second quarter, underwriting deals worth more than $147 billion, according to data from ThomsonReuters. Citigroup, however, led in terms of fees.
JPMorgan shares edged up 0.3 percent, while Citigroup gained 2.2 percent.
Swiss bank UBS, Europe's biggest casualty of the subprime crisis, failed to calm investors' nerves about writedowns to come and instead shuffled its top management. Shares dropped to a 10-year low. ADRs ended off 1.5 percent in the U.S.
Shares of commercial lender CIT Group shot up 30 percent after the company agreed to sell its home-lending businessand other housing-related holdings.
Credit-card providers jumped after an upgrade from UBS on American Express , Capital One , and Discover to "neutral" from "sell," citing valuation that is in-line with the sector's outlook.
Technology stocks managed modest gains, with the tech-heavy Nasdaq up 0.5 percent.
Techs had started to shine in the spring as investors were rich with optimism that a recovery was on the way in the second half. But as the goal posts moved, investors have sold off their positions in tech.
Apple , meanwhile, jumped 4.3 percent following news that the company and AT&T are going to offer an iPhone that doesn't lock users into a two-year contract. AT&T shares slipped.
Starbucks shed nearly 1 percent to close at $15.62, its lowest close in more than four years, as the coffee chain grapples with soaring raw-materials and transport costs, as well as weaker demand for $4 lattes among cash-strapped consumers. After the closing bell, the chain said it's closing 600 stores, more than previously announced, and that it will open fewer than new stores in fiscal 2009.
WEDNESDAY: Weekly mortgage applications; factory orders; crude inventories; earnings from Family Dollar
THURSDAY: Jobless claims, Jobs report, ISM services index; Stock market closes at 1pm ET and bond market closes at 2pm ET
FRIDAY: All major U.S. markets closed for Fourth of July holiday
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