Stocks End Mixed Amid Hope for Relief

US stocks ended mixed Thursday as a jump in oil prices boosted oil stocks and speculation about a government bailout of Fannie Mae and Freddie Mac, and a possible takeover of Lehman Brothers, gave investors some hope that relief is coming.

"Basically, this is a market that wants something to happen to bring closure to some of these nagging issues," said Quincy Krosby, chief investment strategist at The Hartford. "It's become increasingly apparent that you're going to see consolidation in financials. Names disappear -- that's just part of the process," Krosby said. "It's part of the catharsis, the purging, the cleansing. That's the only way the market makes a base and moves higher."

Crude oil shot up more than $6 to settle at $121.18 a barrel, climbing for a third straight session, as the dollar weakened, Tropical Storm Fay threatened Gulf operations and tensions with Russia escalated after a U.S. missile-shield deal with Poland.

Short sellers once again roughed up Fannie Mae and Freddie Mac . The stocks gyrated between positive and negative territory throughout the day, with Fannie ending up more than 10 percent and Freddie finishing off 2.8 percent. Short selling occurs when a buyer borrows stock at a higher price, betting it will decline, then buying it back at the lower price to profit from the difference.

"It's short covering — that's all it is," Dave Rovelli, managing director of equity trading at brokerage Canaccord Adams, said of- the periodic rebound in Fannie and Freddie stocks. "That’s why you see the voiolent snapback — everyone’s chasing to cover their shorts," he said. "It's gonna be like that every day — they're gonna press it, press it, press it."

Fannie and Freddie stocks have been battered throughout the week, suffering declines of more than 20 percent two days this week, amid speculation that they may be taken over by the Treasury and the stocks wiped out.

A collapse of Fannie and Freddie could spark panic selling in the market but market pros say that may be just what the market needs to hit rock bottom and get back on the road to recovery.

CNBC's Jim Cramer aimed his rant Wednesday at Fannie and Freddie, saying trading in the stocks should be halted because they're being manipulated by people with insider information.

By Thursday, Cramer had Lehman Brothers back in his crosshairs, calling it a "lurking black hole" and saying a resollution needs to happen asap.

After a dramatic day of trading, Lehman Brothers finished flat.The rumors were swirling over Lehman -- everything from a flopped asset sale, to a yanked line of credit -- but the real news of the day was that two firms have "buy" ratings on the stock.

Citigroup significantly widened its projected loss for Lehman, as well as Goldman Sachs and Morgan Stanley , but backed its "buy" rating on Lehman stock.

Around midday, Dick Bove of Ladenburg Thalmann raised his rating on Lehman to a "buy," saying the table is set for a hostile takeover of Lehman.

Analyst estimates for third-quarter earnings are coming down across the board, according to Thomson Reuters. S&P 500 company earnings are now expected to rise 3.2 percent during the quarter, down from the prior estimate of 3.4 percent. Financials and consumer-discretionary firms are, not surprisingly, the biggest drag.

Chevron , Home Depot and ExxonMobil were the biggest gainers on the Dow.

AIG shares were the biggest decliner on the Dow, followed by General Motors and JPMorgan .

General Motors shares skidded 2.4 percent after the auto maker said it's preparing for a sale of its Hummer brand. "We haven't really fired the starting gun, but I hope to do so soon," GM CEO Rick Wagoner said at an event at GM's small-car assembly plant in Lordstown, Ohio.

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