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Stocks Finish Up as Tech Offsets Banks

Stocks finished a topsy-turvy day slightly higher, with technology leading the way but gains tempered by another disastrous day in financials.

The Nasdaq tech gauge finished the session with a gain of 1.5 percent, boosted by BlackBerry maker Research in Motion. Intel and Home Depot boosted the Dow and S&P 500, where gains were considerably smaller at about 0.15 percent.

But Bank of America and Citigroup saw their stocks go into another free-fallamid worries about financial health of two of the nation's biggest banks.

Bank of America tumbled more than 20 percent to levels the stock hasn't seen since 1991 amid news that the bank is on the verge of tapping government funds for a second time.

Bank of America is apparently struggling with its takeover of Merrill Lynch as Merrill's losses are larger than previously thought, according to a Wall Street Journal report.

Meanwhile, Citigroup continued to slide, falling below $4, following a 23 percent plunge in the prior session, as investors worry that the sale of its brokerage unit is a precursor to the breakup of the entire firm. A red flag went up when the stock fell below $5 earlier this week as that's when some institutional investors dump the stock.

A drop in crude oil was helping, with the AMEX airline and retail indexes posting gains. Shares of American Airlines parent AMR surged in afternoon trading as did Dow component Chevron .

At the same time, online retailer Amazon was among the S&P 500 leaders after the company provided more details on a holiday sales season it called its best ever. The company said it saw more than 6.3 million orders on Dec. 15 alone, the Wall Street Journal reported.

In addition to Home Depot, the Dow was helped by Dupont and Alcoa.

Banks Still Slumping

The problem with the banking sector "isn’t going to be fixed over night," Doug Peta, president of Peta Associates, told CNBC. "I don’t think stock markets will be able to find a footing until policy makers find a footing," he added.

JPMorgan also turned negative even as it beat estimates in the fourth quarter, reporting earnings per share of 7 cents, or $702 million, while full-year 2008 net income was $1.37 per share, or $5.6 billion.

>> For Major Banks, Trouble Is Just Getting Started

In economic news, initial jobless claims rose by 54,000 last week, more than expected, to a seasonally adjusted 524,000. Continuing claims, however, fell by 115,000 to 4.5 million.

Still, economists cautioned not to get too comfortable.

"The experience of previous deep recessions suggests claims are nowhere near their peak, and we doubt that peak will be reached before the fall," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients. He says, a peak above 750,000 "is a reasonable, if very depressing, expectation."

Among the other data points in today's morning flurry of economic news: Producer prices fell 1.9 percentin December, as expected, amid a 9.3-percent drop in energy costs. Core PPI, which excludes food and energy costs, ticked up 0.2 percent. Meanwhile, the New York Fed reported a gauge of regional manufacturing improved to minus-22.2 in January from a record minus-27.9 in December, and the Philadelphia Fed said its gauge improved to minus-24.3 from minus-36.1 last month.

Apple fell after the company announced late Wednesday that CEO Steve Jobs will be out on sick leave until June and the chief operating officer Tim Cook will take over as CEO until then.

>> It's Time for Apple to Come Clean

The drop wasn't as severe as the 10-percent decline in after-hours trading Wednesday right after the Apple news. Analysts said that initial knee-jerk was overblown.

"We believe that the corporate strategy that Jobs implemented, including a strong emphasis on product design, will remain intact as Jobs will still be making strategic decisions," UBS analyst Maynard Um wrote in a research note. "We believe the leadership team Jobs assembled is more than capable to continue to execute the strategy both near and long term," he wrote.

Adding to woes in the tech sector, several companies announced or are planning layoffs.

Google said it will eliminate 100 full-time recruiter positions. Motorola said it will cut another 4,000 jobsand even software giant Microsoft is said to be considering some serious layoffs.

Job cuts were also in the cards at Delta . The airline said it expects about 2,000 staff will accept an early retirement package.

Still to Come:

THURSDAY: Earnings from Genentech and Intel after the bell
FRIDAY: CPI; industrial output; consumer sentiment; Fed's Lacker speaks; Earnings from Citigroup

ALL WEEK: Detroit Auto Show (Jan. 11-25)