It just goes to show you, a little attitude never hurts: Stocks clawed back all of the prior session's losses as oil hit its lowest point since May and consumer confidence improved.
Banks had a wobbly morning after news that Merrill Lynch plans another hefty writedown and capital-raising move but rallied to the finish line as investors digested the news.
The rally was strong enough to yank all three major indexes out of bear-market territory: The Dow Jones Industrial Average rose 266.48, or 2.4 percent, to close at 11397.56. The S&P 500 gained 2.3 percent and the Nasdaq advanced 2.5 percent.
Most traders are holding out for a bottoming in this market and today's rebound was more an indication of relief about oil prices and the bar being low for economic gauges.
"I’m frustrated, they won’t give me my pony!" Art Cashin, director of floor operations, said on CNBC, referring to his desire for capitulation. But, he added, "Summers are tough to have climactic bottoms."
Oil prices fell more than $2 a barrel, settling at $122.19 a barrel, as demand in the U.S. continued to drop and the average price of gasoline fell below $4 a gallon for the first time in seven weeks.
Consumer confidence ticked higher, pulling it off a 16-year low as concerns about inflation subsided somewhat, the Conference Board reported. The group's gauge of the consumer mood increased to 51.9 in July, the first increase since December, from an upwardly revised 51 in June. Economists had expected a reading of 50, according to a Reuters survey.
More dismal news for the housing sector: Home prices fell by 15.8 percent-- the steepest decline on record -- in May, a 20-city index compiled by Standard & Poor's and Case-Shiller showed. A narrower measure of 10 cities tumbled 16.9 percent, also the biggest decline on record.
There was no time for taking a breather in the financial sector. Just as soon as we cleared the second-quarter and all of its baggage, it was on to the third quarter.
Merrillshares gained 7.9 precent as investors wondered if the brokerage's plan to write down another $5.7 billionand raise $8.5 billion may signal that we're near the end of this wave of writedowns.
Citigroup added 5.9 percentafter Deutsche Bank widened its 2008 loss projectionfor the largest U.S. bank and suggested it may take another $8 billion in writedowns in the third quarter.