The Dow pulled off a gain Monday as Goldman Sachs shares turned positive, taking much of the banking sector with them.
The market had struggled throughout the session as investors weigh the fallout from the Goldman charges and a renewed push for financial reform against beats on both leading indicators and Citigroup's earnings.
In the end, the Dow gained 73.39, or 0.7 percent, to close at 11,092.05. The S&P 500added 0.5 percent. The Nasdaq ended down less than one-tenth of a percent.
This came after stocks posted their biggest loss since Februaryon Friday as the SEC shocked Wall Street with securities-fraud charges against Goldman Sachs.
The selling pressure carried over into the start of trading today, with the CBOE volatility index, widely considered to be the best gauge of fear in the market, climbed to nearly 20, as investors worried about the full scope of the investigation — if other banks would face such charges and if the whole thing would trigger a market selloff.
But things turned around in the final hour of trading, with the Dow, VIX and shares of Goldman Sachs recovering following news that the SEC vote to sue the company was 3 to 2 — on party lines — which gave investors some encouragement that if the SEC vote was that close, getting the charges to stick might also be.
Also, Goldman is scheduled to report earnings Tuesday morning and is expected to blow the lid off of expectations.
Some market pros said news of the SEC vote helped investors shrug off worries about the case and focus on Goldman's earnings.
Goldman shares finished up 1.6 percent, after shedding 13 percent on Friday. Earlier, FBR removed Goldman from its "top picks" list.
The parameters of the Goldman probe are yet unknown — regulators in the U.K. and Germany are reportedly considering charges against the brokerage.
Meanwhile, a former employee of John Paulson, the hedge-fund manager who bet against the Goldman bundle of subprime mortgages, told the SEC that this deal was the only one like that.
And Rochdale Securities analyst Dick Bove said in a morning research note that the SEC's case against Goldman was weakbut it could still jeopardize the stability of the financial industry.
House Banking Committee Chairman Barney Frank said this fraud case against Goldman Sachs increases the chance that financial reform will pass.
Despite fears in the market, Fritz Meyer, senior market strategist at Invesco AIM said he sees the S&P 500 "scratching its way" toward 1,500 in the next seven quarters.
Meyer said he likes the financial sector as it has the “furthest to recover.” He also likes industrials, materials, consumer discretionary and energy as oil prices are expected to head higher.
Citigroup shares jumped 7 percent after the bank blew past earnings and revenue expectations.
Bank of America shares fell 0.1 percent despite the fact that at least five different brokerages raised their price targets on the bank.
Just one major economic report today: Leading indicators jumped 1.4 percentto a record high in March, after an upwardly revised 0.4-percent increase in February; economists polled by Reuters had expected a more modest 1-percent increase.
Still, the dollar firmedas investors sought safety in low-yielding but stable currencies. Commodities took a hit with oil pricesfalling as much as $2.50 to below $81 a barrel and gold prices reached a two-week low of nearly $1,120 an ounce.
Eli Lilly beat expectations with earnings of $1.13 a share even though the pharmaceutical giant warned that the new health-care law would cut into revenue.
Halliburton reported a 46-percent drop in earnings due to charges in Venezuela and weak demand across Latin America.
After the bell, earnings are due out from IBM . Analysts expect the tech giant to report $1.93 a share on revenue of $22.75 billion, up 5 percent and 14 percent respectively. IBM shares rose ahead of the results.
A slew of price-target upgrades in the tech sector: Apple was raised by Kaufman to $305 from $295, Applied Materials was raised by RBC to $13 from $12 and Broadcom was raised by Broadpoint Amtech to $42 from $36.
But Palm shares fell 12 percent after the head of its operating-system software resigned, RadioShack stopped carrying Palm phones and Morgan Keegan downgraded its rating on the gadget maker.
RadioShack shares rose amid buzz that someone may step in soon to buy the electronics retailer. One of the rumored buyers is Best Buy , which saw its shares fall nearly 2 percent.
Toyota shares slipped after the auto giant agreed to pay a record $16.4 million fine stemming from its massive accelerator-pedal recall.
Airline stocks were mixed as investors aimed to digest the fallout of travel delays due to the cloud of volcanic ash snarling flights world-wide and as talks between United parent UAL and Continental continued. Reports suggest the talks could result in a merger or a marketing alliance. United is also in the midst of talking about a possible merger with U.S. Airways .
Southwest Airlines rose after Citigroup raised the airline's price target to $16.50 from $15. Southwest's operations have not been affected by the Icelandic volcano as the company mainly operates domestically.
Volume was slightly higher than usual, with about 10.77 billion shares changing hands on the three major exchanges. Decliners outpaced advancers on the Big Board, roughly 5 to 4.
This Week:
MONDAY: Earnings from IBM after the bell
TUESDAY: Citigroup shareholders meeting; Earnings from Coke, Goldman Sachs, J&J, Regions Financial, Apple & Yahoo
WEDNESDAY: Weekly mortgage apps; weekly crude inventories; Earnings from AT&T, Boeing, McDonald's, Morgan Stanley, United Technologies, Wells Fargo, Altria, eBay, Starbucks, Qualcomm & Sandisks
THURSDAY: PPI; weekly jobless claims; existing-home sales; Earnings from Pepsi, Verizon, Fifth Third, PNC Bank, American Express, Microsoft & Capital One
FRIDAY: Durable-goods orders; new-home sales; Earnings from Travelers, Honeywell, Schlumberger & Xerox
Send comments to cindy.perman@nbcuni.com.
