Markets Rebound as Oil Prices Rise, Spurring Energy Rally

Stocks staged a rebound yesterday despite a new round of poor economic data and weak corporate earnings reports.

The Dow Jones industrial average slipped in and out of positive territory all day, moving hundreds of points an hour and continuing the volatility that has come to exemplify the fear and uncertainty of investors. A late-day rally by energy stocks, which were buoyed by an uptick in oil prices, led the Dow higher 2 percent, or 172.04 points, to close at 8691.25.

The broader Standard & Poor's 500-stock index rose 1.3 percent, or 11.33 points, to close at 908.11. But the tech-heavy Nasdaq composite index struggled to shed investor anxiety after online retailer Amazon gave a gloomy forecast for its earnings this year. The Nasdaq fell slightly, 0.73 percent, or 11.84 points, to close at 1603.91.

After stocks plummeted Wednesday, including a loss of more than 500 points for the Dow, analysts said a rally was predictable as traders picked up cheap stocks, hunting for bargains and betting that stocks wouldn't lose significantly more value. But investors had to fight to sustain gains yesterday as the market repeatedly flirted with more losses and economists remained concerned that the financial crisis would weigh down corporate profits into 2009.

New data from the Labor Department added to investor worries. Applications for unemployment benefits rose 15,000 last week to a seasonally adjusted 478,000 -- a bigger jump than analysts expected. That compares with 333,000 claims at the same time last year.

This also follows job cutbacks announced by several firms this week, including the drugmaker Merck, which said it would cut about 7,200 positions, and National City, a Cleveland-based bank, which plans to eliminate 4,000 jobs. Xerox said yesterday that it would cut 3,000 positions worldwide, despite reporting a 2 percent increase in quarterly net income. The company's shares fell 3 percent, to $7.71.

"That just confirms that we're in a recession," said Robert B. MacIntosh, chief economist for Eaton Vance in Boston, referring to the unemployment benefits figure. "The debate is how deep and how long. That is the unknown."

Investors have focused on a succession of negative earnings reports this week, overshadowing signs that government efforts to stem the financial crisis and encourage banks to lend to each other are beginning to work.

That pattern continued yesterday as Sony dramatically lowered its profit and sales forecast for the fiscal year, sending its stock down 8 percent, to $21.46. United Parcel Service reported a 10 percent drop in net income and said profit this year would be at the lower end of its forecast.

"Based on economic forecasts, we anticipate a challenging environment for a number of quarters going forward," said Kurt Kuehn, UPS's chief financial officer.

Its shares gained 4 percent, to $48.13.

Dow Chemical reported a 6 percent increase in third-quarter profits with the help of price hikes for some of the company's products. But the company's chief executive still gave a dour assessment of the future. "The global economy is now feeling the full effects of the same economic issues that have plagued the U.S. for the past several quarters," Andrew N. Liveris said in a statement. "In our view, we will likely see a global recession through most of 2009." Dow Chemical was up 10 percent, to $24.43 a share.

Crude oil staged a rebound yesterday after falling to a new yearly low Wednesday. Prices rose 1.6 percent, or $1.09, to $67.84 a barrel. Oil prices have been dragged down by expectations that a global recession would cut fuel demand even further, but investors are also now anticipating that the Organization of the Petroleum Exporting Countries will announce a cut in production soon.

Shares of Exxon Mobil and Chevron were up 9 percent and 8 percent, respectively.