Stocks were back on the see-saw Wednesday, rising and falling with each new report or flinch in oil prices.
Stocks pared gains midmorning as oil made a quick jump higher after an unexpected draw in crude inventories.
The market had opened higher as traders cheered a retreat in oil prices and digested a bleak ADP jobs report. Stocks got an extra boost a half-hour in, when the government reported that factory orders rose 0.6 percent in May, helped by an increase in new aircraft orders. But even without the volatile transportation component, orders were up 0.4 percent, as expected.
Oil prices wavered briefly fell afte the inventories report, but soon moved back above $142 a barrel.
Private employers in June slashed 79,000 jobs from their payrolls, the largest drop in nearly six years, according to a report from ADP Employer Services. Economists had expected a more mild drop of 20,000 jobs. The May number was revised to show a 25,000-job gain, compared with the previously reported 40,000 increase.
The ADP report is closely watched ahead of the government's monthly payrolls report, due out on Thursday, one day earlier than usual due to the July 4 holiday.
"I am definitely looking for a decline in jobs… we are expecting a decline of about 60,000 jobs. I'm actually thinking it might be a little bit friendlier than what the market expects," Donna Heidkamp from RJO Futures told "Worldwide Exchange."
But some economists warned that, as auto makers dropped a batch of awful sales numberson the market on Tuesday, American workers may be in for more trouble ahead.
General Motors skidded after Merrill Lynch said the struggling auto maker is going to need to raise $15 billionto quash liquidity concerns and that a bankruptcy filing is "not impossible." The brokerage cut its rating on GM to "underperform" from "buy" and slashed its price target on the stock to $7. Shares were trading between $11 and $12.
Financials were mostly higher, building on the prior session's gains, when the sector ranked No. 1 among 10 key S&P sector indexes. Most regional bank stocks were up about 2 percent, while there were a few pockets of weakness in investment banks.
The sector got a boost from across the pond, when Deutsche Bank , which had been hit with $8 billion in writedowns, said it now expects to swing to a profit and won't need to raise any more capital.
Lehman Brothers and ADRs of Swiss bank UBS were off more than 1 percent.
Merrill Lynch skidded after yet another analyst lowered her estimate.
Oppenheimer analyst Meredith Whitney slashed her second-quarter earnings estimate for Merrill to a loss of $4.21 a share and projected the bank would take $5.8 billion in writedowns for the quarter. Whitney said she expects the firm to announce plans to raise capital along with its second-quarter report. She also blew out her full-year estimate to a loss of $5.37 a share from her prior estimate of 45 cents a share.
UBS projected Merrill's writedowns for the quarter at $4.5 billion and said Citigroup is likely to face a more severe $8.7 billion in writedowns.
Meanwhile, Microsoft is preparing a new bid for Yahoo's search business and has approached other media companies about joining it in a deal that would effectively lead to Yahoo's breakup, the Wall Street Journal reported.
Starbucks said on Tuesday it plans to close 600 underperforming U.S. stores and cut up to 12,000 full- and part-time positions, as it copes with an economic downturn and increasing competition.