Late Turnaround Buoys Stocks

Stocks staged a dramatic turnaround late Wednesday after a steep early sell-off, bolstering hopes that the latest market decline had run its course.

The rally occurred in the face of rising bond yields and another jump in oil prices.

The Dow Jones industrial average ended 25.69 points higher, or 0.3%, at 10,045.16 after falling as low as 9,852.19 -- a swing of more than 190 points during the session.

Broader market indexes also rebounded sharply. The technology-dominated Nasdaq composite index, down as much as 52 points at midday, snapped back to close with a small loss, off 5.76 points, or 0.3%, at 1,925.59.

Rising stocks outnumbered losers by 17 to 16 on the New York Stock Exchange, while losers had a 17-to-14 edge on Nasdaq. Trading was active.

Analysts said the buying wave suggested that many investors had decided that share prices, battered in recent weeks by rising interest rates, high oil prices and pessimism about the situation in Iraq, had fallen low enough to be attractive again.

In Wall Street parlance, the market had become “oversold,” said Kevin Connellan, head of trading at Northern Trust. Through Tuesday, the Dow had fallen in eight of the previous 12 sessions and was down 5.1% from April 5.

Technical factors also contributed to the market’s revival: The rebound began after the Standard & Poor’s 500 index, at its midday low, held above its average level of the last 200 days, Connellan told Bloomberg News.

Traders track such levels on stock charts to gauge the market’s momentum. The S&P; index ended with a gain of 1.83 points, or 0.2%, at 1,097.28 after falling as low as 1,076.

Still, some investors said it would be difficult for the market to move significantly higher in the short term.

“[Corporate] earnings are good, yes, but the market doesn’t care about that. It’s forecasting what’s going on down the road,” said Gary Kaltbaum, president of Kaltbaum & Associates, a money management firm.

Many analysts say the biggest barrier to a sustained rally is the expectation that the Federal Reserve will begin tightening credit this summer.

Long-term bond yields, which have soared since late March on Fed concerns, rose further on Wednesday.

An auction of $15 billion in new five-year Treasury notes found plenty of interest on Wall Street but disappointing demand from so-called indirect bidders, which include foreign central banks.

The sale of five-year notes, the second leg in a three-part auction totaling $54 billion, went at a yield of 3.93% and drew bids for 2.64 times the amount offered. That was better than April’s 2.28 level. But indirect bidders picked up 34% of the issue, down from April’s 41% -- raising concerns that some foreign investors are souring on U.S. bonds.

That prompted another bout of selling that pushed the benchmark 10-year T-note yield to 4.81%, up from 4.75% Tuesday and the highest since July 2002.

In commodities trading, oil continued to rise: Near-term futures in New York rose 71 cents to $40.77 a barrel, a new 13-year high.

Among Wednesday’s market highlights:

* An index of financial shares rose 1%, the biggest gain among the S&P; 500’s 10 industry groups. Bank of America jumped $1.91 to $80.34 after Prudential Equity analyst Michael Mayo raised his rating on its shares to “overweight” from “neutral weight.”

Citigroup rose 62 cents to $46.31 after saying it would buy Principal Financial Group’s residential mortgage business for $1.26 billion. Principal jumped $2.40, or 7.4%, to $34.73.

* Energy stocks were broadly higher with oil prices. ChevronTexaco gained 87 cents to $91.83, Sunoco rose $1.27 to $61.30, and Schlumberger was up $1.07 to $56.70.

* Union Pacific shares eased 14 cents to $56.78. The Omaha-based railroad operator said it planned to meet with shipping company customers Monday to address concerns about service delays in California and other states. The nation’s largest railroad has been beset by train crew shortages and congestion for the last several months.

* Cisco Systems fell 29 cents to $21.96, a day after reporting that fiscal third-quarter profit jumped nearly 26%, with sales up nearly 22%. Investors had hoped for even higher numbers.

* Qualcomm retreated 82 cents to $63.90, even as the company boosted its third-quarter profit and revenue forecast. Excluding one segment, earnings will be as much as 53 cents a share, up from 33 cents a year earlier, and revenue will rise as much as 46%, Qualcomm said.

The stock was up from a midday low of $62.33.