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US stocks end higher after shaky day of trading

ABOUT halfway through first-quarter earnings reports, Wall Street still isn't sure where the U.S. economy is headed.

The Dow Jones industrials closed yesterday with a gain of about 71 points, or 0.9 percent, but only after another shaky, back-and-forth day of trading.

Some companies reported strong earnings including PNC Financial Services Group, which boosted other bank stocks including JPMorgan Chase & Co., Bank of America Corp. and Wells Fargo & Co.

Poor results from other companies, such as UPS Inc. and steelmaker Nucor Corp., signaled trouble, however, and economic data was downbeat, too. Sales of existing homes fell 3 percent in March, and claims for both new and continuing unemployment benefits rose last week.

Meanwhile, a big unknown still looms over the market: The results of the government's "stress tests," which will measure banks' ability to survive severe loan losses. The Federal Reserve is expected to explain its methodology for the tests on Friday and release results on May 4.

"We're in the middle of spring and people are trading stocks on hope," said Charles Ortel, managing director at Newport Value Partners in New York. "But the harder data that are appearing are very negative."

Investors are more confident that the economy is no longer in a freefall than they were at the start of the year. But they are no more certain about the economy's direction than they were when earnings season began about two weeks ago. The bulk of earnings from large companies are in, and they've been mixed.

The stock market is holding up, which is a good sign. But it's not extending its massive rally, either. After hitting nearly 12-year lows in early March, the Dow rallied and hit 8,131 last Friday. It has been wobbling underneath that level since.

"The most important thing that everybody's looking for is clarity - good, bad or indifferent," said Anthony Conroy, managing director and head trader for BNY ConvergEx Group.

The Dow rose 70.49, or 0.9 percent, to 7,957.06 - making up most of the loss it suffered Wednesday, when it fell 83 points.

Broader stock indicators also finished moderately higher. The Standard & Poor's 500 index rose 8.37, or 1 percent, to 851.92, and the Nasdaq composite index rose 6.09, or 0.4 percent, to 1,652.21.

The Russell 2000 index of smaller companies, however, fell 4.09, or 0.9 percent, to 466.62.

The National Association of Realtors reported that home sales fell 3 percent to an annual rate of 4.57 million in March from a revised pace of 4.71 million units in February. And the Labor Department reported a rise in new unemployment claims last week that was more than expected. The number of workers continuing to file claims for jobless benefits topped 6.13 million - the 12th straight weekly record.

Ken Winans, president and chief executive of Winans International in Novato, California, said investors have been too quick to predict the end of the recession given difficulties like the glut of available homes and mounting unemployment. A sense that the economy was starting to stabilize touched off the rally that began last month.

"The stars are not all going to align," Winans said of economic readings. "Bottoms take time."

But traders have been taking some comfort from companies that have so far navigated the recession with success.

PNC Financial Services Group Inc. rose US$2.87, or 7.5 percent, to US$40.93 after reporting a surprising 22 percent rise in first-quarter profit, boosted by its acquisition of National City Corp. and lower funding costs.

In other positive earnings news, Raytheon rose US$2.74, or 6.6 percent, to US$44.04 after raising its full-year earnings forecast and seeing stronger sales of missiles, radars and defense electronics.

Meanwhile, Apple rose US$3.89, or 3.2 percent, to US$125.40, while eBay rose US$1.84, or 12.5 percent, to US$16.62. Good results at both companies raised expectations that some consumers will continue to spend on gadgets and other goods.

Other earnings reports were more troubling.

UPS fell US$1.42, or 2.6 percent, to US$53.33 after earnings fell more than 55 percent as fewer people sent packages and used premium services like next-day air. UPS also warned second-quarter results will fall short of expectations.

And Nucor Corp., the largest U.S. steel producer, posted its first loss ever due to tumbling demand, and forecast an even wider loss for the second quarter. Nucor shares fell US$4.07, or 9.2 percent, to US$40.

About three stocks rose for every two that fell on the New York Stock Exchange, where volume came to 1.57 billion shares.

Bond prices rose, pushing the yield on the benchmark 10-year Treasury note down to 2.92 percent from 2.94 percent late Wednesday.


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