Stocks finished higher Wednesday as investors rotated into defensive stocks like pharmaceuticals and Alcoa advanced ahead of earnings.
Stocks had opened higher, then retreated for much of the day, before squeaking out a 7th-inning win.
The Dow Jones Industrial Average rose about 15 points, or 0.2 percent. The S&P 500 fell about half a point, while the Nasdaq gained a point.
Increased jitters in the market have sent the CBOE Volatility Index, widely considered the best gauge of fear in the market, higher. The VIX ended above 31.
This came after stocks hit their lowest level in 10 weeks on Tuesday amid growing doubts about the economic recovery and jitters about earnings. Validating investor fears about the economy, an Obama economic adviser suggested that a second round of stimulus may be needed.
On Wednesday, a White House budget official said the Obama administration is NOT discussing a second stimulus.
"No one in the administration is talking about a second stimulus at this point," Robert Nabors, of the Office of Management and Budget, said at a House hearing on the $787 billion stimulus plan. "What we are focused on right now is implementing the recovery act that Congress has already passed," he said.
General Electric , Bank of America and Intel were the biggest percentage decliners on the Dow.
Alcoa gained 0.5 percent after a rocky trading session as investors jockeyed for positions ahead of earnings from the aluminum giant after the closing bell. Analysts expect a third straight loss.
Alcoa is the first Dow component to report and marks the unofficial start to earnings season. Analysts expect the season to be another downer, projecting a 36-percent decline in S&P 500 earnings for the second quarter, which would be the eight straight quarter of declines. Commodities stocks are expected to lead the decline given the sharp dropoff since last year's peak.
Oil stocks including ExxonMobil and Chevron skidded as crude fell nearly $3 to settle at $60.14.
Crude prices continued to slide even after a report showed crude supplies shrunk by 2.9 million barrels last week, as traders continued to worry about proposals from both sides of the Atlantic to crack down on specualtion in oil markets.
- Op-Ed: Tighter Rules Needed to Control Oil Prices
- Cramer: Oil Futures Market Is a 'Farce'
- Schork: Oil Speculators—The Devil You Know
Reflecting these hard economic times: Family Dollar reported its profit jumped 36 percent, beating expectations, as cost-conscious consumers headed to the dollar store for bargains on staples. Its shares jumped more than 12 percent.
Other retailers also advanced ahead of chain-store sales, due out Thursday. Wal-Mart was up 1.1 percent, while JCPenney gained 4.4 percent and Tiffany advanced 7.1 percent.
One economic beacon came out of the housing sector: Mortgage applications rose 11 percentlast week as mortgage rates again receded.
The 30-year fixed was at 5.32 percent overnight, according to Bankrate.com.
Still, housing stocks tumbled, with Hovnanian off more than 10 percent and Beazer sliding 7.1 percent.
Google rose 1.5 percent after the search giant announced late Tuesday plans for a PC operating system based on its Chrome Web browser that will challenge Microsoft 's Windows operating system.
Microsoft shares gained 0.1 percent.
Overall, techs finished mostly lower as investors worried that the stalled recovery would crimp tech spending, and instead moved back into defensive stocks like pharmaceuticals.
Amgen shot up 14 percent after an osteoporosis drug met trial goals.
Johnson & Johnson and Merck were the two biggest percentage gainers on the Dow, with each gaining 1.5 percent.
And insurers got a boost amid buzz about a potential compromise in the Obama administration's push for a public health-insurance alternative that investors see as less harmful to private insurers and hospital operators.
Today, the administration announced a deal with three hospital groups that is expected to save $155 billion in health-care spending over the next decade, mainly by lowering charges for health services to the poor and elderly.
Pharma analyst Leerink Swan said movements in the sector would remain difficult to predict as health-care reform is in progress and the economy remains in flux.
NYSE Euronext said it was informed by authorities that nyse.com was hackedbut added that it "has not and could not impact" trading.
Still to Come:
THURSDAY: Chain-store sales; weekly jobless claims; wholesale trade; Fed's Duke speaks; Earnings from 3Com
FRIDAY: Import/export prices; international trade; consumer sentiment
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