Dow Ekes Out Gain, but EU Fears Limit Rally

The Dow and S&P clawed back into positive territory at the close Wednesday, adding to the sharp rally from the previous session, but gains were limited over renewed fears over the euro zone debt crisis.

The Dow Jones Industrial Average gained 21.04 points, or 0.17 percent, to close at 12,418.42, led by Alcoa . Verizon was the biggest laggard on the blue-chip index.

The S&P 500 added 0.24 points, or 0.02 percent, to close at 1,277.30. The Nasdaq slid 0.36 points, or 0.01 percent, to end at 2,648.36.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, ended near 22.

Among key S&P sectors, health care finished lower, while consumer discretionary rose.

“We had a good rally yesterday but we’re taking a step back [today] and realizing that the things that have been plaguing us in the second half of last year are still there,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research. “Liquidity issues out of Europe are dominating talk once again and dose of reality is coming back.”

European shares closed loweramid worries over the region's massive debt refinancing in the first quarter.

Commercial banks' overnight deposits at the ECBhit a fresh record high of 453 billion euros ($591 billion), stressing the ongoing worries that banks have about lending to each other.

UniCredit plunged after Italy's biggest bank priced a 7.5 billion euro ($9.8 billion) capital hike at a 43 percent discount.

And an auction of 5 billion euros ($6.5 billion) of 10-year German bunds was only just covered, while the yield fell further.

However, Detrick said he is encouraged by the improving economic data in the U.S.

“We’re looking at a 15 percent rally by year-end,” said Detrick, adding that he sees potential for an “explosive year” based on lowered market expectations together with some positive economic news.

Ford and GM ended higher after both U.S. automakers said sales jumped in December by 10 and 5 percent, respectively. Meanwhile, brokerage Guggenheim started coverage of both firms with a "neutral" rating. Toyota also posted a gain in auto sales.

On the tech front, Yahoo named Scott Thompson, the former president of Ebay's PayPal business, as its new CEO.

AT&T has agreed to pay TiVo a minimum of $215 million and additional monthly licensing fees to settle a patent infringement dispute related to recording live TV. Meanwhile, Evercore raised its rating on TiVo to "overweight" from "equal-weight" and boosted its price target to $12 from $11.

Meanwhile, Netflix surged to lead the S&P gainers after the online-movie company said its subscribers streamed more than 2 billion hours of movies and TV shows in the latest quarter.

ExxonMobil is in talks to sell most of its 50 percent stake in TonenGeneralSekiyu back to its Japanese refining partner in a deal that could total $5 billion.

Fellow Dow componant McDonald's gained after Goldman Sachs raises its price target on the fast-food giant to $110 from $103.

Credit-card providers Visa and MasterCard slumped after brokerage firm Janney lowered its ratings on both firms to "neutral" from "buy."

Meanwhile, Eastman Kodak plunged nearly 30 percent after a report that the company is preparing for bankruptcy filing. Earlier, the NYSE warned it would kick off Kodak from the exchange if it cannot boost share prices over the next six months.

Mosaic is slated to post earnings results after-the-bell tonight.

On the economic front, factory orders rose in November, thanks to gains in demand for airplanes.

Meanwhile, loan demand to buy homes and refinance mortgages fell in the last week of 2011, according to the Mortgage Bankers Association.

“Capital preservation is the theme for 2012,” said Brian Battle, vice president of trading at performance Trust Capital Partners. “We have stability, but we still don’t have a balanced global economy…We’re facing a debt overhang and a world economy that’s deflating and that’s bad for developing and exporting nations, but less bad for fully developed nations like the U.S.”

Former Massachusetts governor Mitt Romney won the Iowa Republican presidential caucusesby a mere eight votes over former U.S. senator Rick Santorum.

Meanwhile, Republican presidential candidate Michele Bachmann is suspending her campaignafter a disappointing outcome in the Iowa caucuses.

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On Tap This Week:

THURSDAY: ADP employment report, jobless claims, ISM non-mfg index, oil inventories, chain-store sales; Earnings from Monsanto, Constellation Brands, Family Dollar
FRIDAY: Non-farm payrolls

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