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Wall Street extends gains into second day

IT took some work, but investors managed to turn Wall Street's best performance this year into a two-day advance.

Stocks ended with modest gains yesterday but the Dow Jones industrial average still recorded its first two-day climb since Feb. 5-6. The buying was far more subdued than on Tuesday when Citigroup Inc.'s upbeat assessment of its business sent investors rushing into the market, in part to cover bets that stocks would continue to slide. The Dow on yesterday ended up nearly 4 points after jumping 379 the day before.

The session's mood was more tentative than some investors might have hoped for, but given the market's dismal performance for much of 2009, just holding on to gains from the rally was a victory.

Financial stocks that led the market's huge rally Tuesday continued to pull ahead yesterday. Tech stocks rose after an analyst raised Hewlett-Packard Co.'s rating.

But analysts again cautioned that the market remains deeply troubled by the problems in the banking industry and the impact of the recession on companies in all industries. And, they noted that there was little conviction behind Tuesday's buying.

Investors nervous about the economy likely will need more good news to keep buying.

"People are looking past the sizzle and saying 'where's the steak?'" said Doug Roberts, chief investment strategist for

Much of Tuesday's buying came from short covering, which occurs when investors need to buy stock to replace shares that were borrowed and then sold on expectations of a market decline.

On yesterday, the head of the Securities and Exchange Commission said the agency "hopefully" will propose next month the reinstatement of the uptick rule, which aims to prevent a massive plunge in stock price fueled by short selling. It expired in 2007 and supporters say its absence has added to the market's volatility.

For there to be a sustained advance, there has to be "many, many days of positive tone and the market interpreting data and news as more positive than negative," said Roman Dubczak, head of equity capital markets at CIBC World Markets.

Many analysts are calling the market's advance this week a bear market rally. A bear market is defined as a drop of 20 percent from a market peak; rallies during bear markets tend to disappear quickly as investors remain pessimistic. Both the Dow and Standard & Poor's 500 index are at levels less than half the record highs they reached in October 2007.

Bear market rallies can last longer than a single day, said Mike Stanfield, chief executive of VSR Financial Services.

"If you go back a year and a half, every single rally has turned out to be a bear market rally," Stanfield said. "So I think you'd have to guess that this is another (one)."

The Dow rose 3.91, or 0.1 percent, to 6,930.40. The rise gives the blue chips their third advance in four sessions.

The S&P 500 index rose 1.76, or 0.2 percent, to 721.36, while the Nasdaq composite index, which has a heavy representation of tech stocks, rose 13.36, or 1 percent, to 1,371.64.

The Russell 2000 index of smaller companies slipped 1.45, or 0.4 percent, to 366.30.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 1.75 billion shares.

Short-term traders were dominating the market again, analysts said, adding to the choppiness yesterday. The Dow shifted between gains and losses 37 times during the session.

Investors kept their eyes on the financial industry, as many analysts believe it will be the leading indicator of when the market begins to turn around.

"We're not going to have a solid recovery beginning until we make a solid bottom on financials," Stanfield said.

Citigroup rose 9 cents, or 6.2 percent, to US$1.54. News that the company was operating at a profit during the first two months of 2009 triggered Tuesday's rally. The bank has been seen as the weakest of the nation's financial institutions, and has not turned a profit since the third quarter of 2007. Last week, its stock fell below US$1 for the first time.

JPMorgan rose 90 cents, or 4.6 percent, to US$20.40. Bank of America Corp. rose 14 cents, or 2.9 percent, to US$4.93.

Apple Inc. rose US$4.05, or 4.6 percent, to US$92.68 after announcing a new version of its iPod shuffle music player. Hewlett-Packard jumped US$1.57, or 5.8 percent, to US$28.61. A UBS analyst upgraded the printer and computer maker, saying investors have been overly cautious about the stock.

Bond prices rose after falling during Tuesday's stock market rally. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.91 percent from 3 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, slipped to 0.22 percent from 0.24 percent Tuesday.

The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude fell US$3.38 to settle at US$42.33 a barrel on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average jumped 4.6 percent. Britain's FTSE 100 fell 0.6 percent, Germany's DAX index rose 0.7 percent, and France's CAC-40 rose 0.4 percent.


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