Stocks ended higher Tuesday, snapping a three-day losing streak, as an earnings beat from Merck and better-than-expected housing report gave the market a boost.
Investors were also encouraged by a drop in the dollar, details of a GOP counter-stimulus plan that would slash the corporate tax rate, and word from Treasury Secretary Tim Geithner that the government was about to get "very aggressive" with fiscal policy.
The session was topsy-turvy as investors digested all that against some gloomy news out of the tech sector and weak auto sales.
The Dow Jones Industrial Average rose 141.53, or 1.8 percent, to close at 8,078.36. The S&P 500gained 1.6 percent, while theNasdaq jumped 1.5 percent.
Pending-home sales rose 6.3 percent in December, the National Association of Realtors reported. That was the first increase since August.
Merck was the biggest gainer on the Dow, rising 6.4 percent, after the pharmaceutical giant swung to a profit of 87 cents a share, compared with a loss of 75 cents a share a year earlier, and backed its 2009 outlook.
Other drug stocks advanced, including Schering-Plough, which gained 8.3 percent, after the company swung to a profit but missed analysts' target amid slowing sales.
Tech stocks largely bounced back by the closing bell, though SanDisk and Motorola ended sharply lower.
SanDisk was the biggest drag on the Nasdaq and S&P, falling 23 percent, after the flash memory-card maker warned that it would miss its revenue target. SanDisk also said it may issue a stock offering.
And Motorola shares dropped 11 percent after the handset maker predicted a deeper-than-expected loss, suspended its dividend and said it's looking for a new finance chief after the unexplained departure of Paul Liska.
Auto makers skidded as December auto sales plunged to a near 27-year low.
General Motors reported its sales plunged nearly 51 percent, more than 10 percent over what was expected. Ford also missed, reporting a 40-percent drop in sales.
Banks declined amid jitters over the so-called "bad bank" plan and worries that government stimulus will be too dilutive, with Bank of America dragging at the bottom of the Dow pack, ending down 12 percent.
And PNC Financial Services shares tumbled 7.2 percent after the bank announced plans to cut 5,800 jobs following its recent purchase of troubled lender National City Corp, and also posted a fourth-quarter loss. PNC stopped short of backing its dividend.
Not even news that Citigroup plans to use $36.5 billion of bailout funds to boost lendingcould lift the sector out of its funk. Citi shares lost 5.2 percent.
The near $900 billion stimulus package faces a "difficult next few days," according to President Obama, as the Democratic-controlled Senate debated the plan amid Republican opposition.
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BP reported a $3.3 billion loss, citing lower energy prices, after posting a whopping $4.4 billion profit a year earlier.
Dow Chemical joined the chorus of dismal news, posting a $1.5 billion loss for the fourth quarter as sales dropped 23 percent to end one of the company's worst years.
Department-store operator Macy's announced plans to cut 7,000 employees and slash its dividend Monday.
Also, homebuilder DR Horton posted a narrowed loss of 20 cents per share that beat analyst expectations of a 52-cent per share loss.
This Week:
TUESDAY: Earnings from Disney, Electronic Arts, Met Life and Yum Brands after the bell
WEDNESDAY: Weekly mortgage applications; ISM services index; weekly crude inventories; Earnings from Time Warner, Clorox, Kraft, Cisco, Prudential, Sunoco and Visa
THURSDAY: Chain-store sales; weekly jobless claims; factory orders; Earnings from Kellogg, MasterCard, Unilever, Hartford Financial, News Corp
FRIDAY: December jobs report; consumer credit
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