Stocks Advance as Investors Play Defense

Stocks were back up in a yo-yo session as investors took some defensive positions in stocks like McDonald's amid nagging worries about the health of banks.

McDonald's jumped more than 2 percent, making it one of the biggest gainers on the Dow, after Boeing .

Banks have taken a beating all over the world this week amid a fresh wave of fear about epic losses out of the sector.

Citigroup shares turned lower after an early 5-percent gain, while Bank of America tumbled 15 percent. Both are down about 40 percent for the week. A lot of other regional bank stocks are down about 20 percent on the week.

Bank of America obtained a $20 billion bailout from the government and a guarantee for almost $100 billion of potential losses on toxic assets because of a deteriorating balance sheet at Merrill Lynch.

The bailout makes Bank of America the biggest recipient of taxpayer money after Citigroup.

Bank of America's results disappointed in the fourth quarter, as it posted a loss of 48 cents per share compared with consensus estimates for a small profit of 8 cents per share. The bank also slashed its dividend to a penny a share.

Citigroup reported a quarterly loss much wider than expected and said it would reorganize into two different units, separating its banks from the risky assets on its books.

>> Pros Drill Down on Citigroup, Bank of America Results

More good news for fans of bailouts came as the Senate rejected a bid to block the release of the second half of a $700 billion bailout program, handing an early political victory to President-elect Barack Obama.

Also in the sector, Swiss bank UBS gained more than 1 percent as it agreed to sell the trading books of some of its commodities business to Barclays , which fell more than 6 percent.

Meanwhile, Intel was one of the top gainers on the Dow as earnings met expectations, though the earnings actually fell 90 percent and the chip maker tempered its outlook for the current quarter.

>> Track all 30 Dow stocks.

Mobile-phone maker Sony Ericsson, owned by Sony   and Ericsson, posted a much-bigger-than-expected fourth-quarter lossand announced plans for additional cost savings.

Auto-parts marker Johnson Controls reported a larger-than-expected lossas production volumes fell, and the company predicted more of the same ahead. Shares fell.

And Toyota said late on Thursday it would reduce production at several North American plants over the next few months trying to cut its vehicle inventory in half.

Shares of Dow components Procter & Gamble and Kraft Foods both gained after the companies announced the amicable settlement of a lawsuit. P&G had alleged that Kraft violated a patent regarding the Maxwell House coffee plastic container. Terms of the settlement weren't disclosed.

In economic news, consumer sentiment improved slightlyin a mid-January reading to 61.9 from 60.1 at the end of December.

Consumer prices fell 0.7 percentin December, better than the 0.9-percent decline expected. Core CPI, which excludes volatile food and energy costs, were flat for a second straight month; economists had expected a slight 0.1-percent gain. The annual pace of consumer-price inflation was the slowest in more than 50 years.

Industrial production dropped by a bigger-than-expected 2 percent in December.

On Tap for Next Week:

MONDAY: All U.S. financial markets closed for Martin Luther King Jr. holiday
TUESDAY: Obama inauguration day; Earnings from J&J, IBM, CSX
WEDNESDAY: Weekly mortgage applications; Earnings from UNited Tech, Abbott Labs, Northern Trust, US Bancorp; Burlington Northern
THURSDAY: Housing starts; jobless claims; crude inventories; Earnings from Nokia, Fifth Third Bancorp; KeyCorp; Southwest Air; SunTrust Banks; United Health, Union Pacific, Microsoft, AMD, Capital One
FRIDAY: Natural-gas inventories; Earnings from GE, Harley-Davidson and Xerox

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