Financials pull stocks higher ahead of earnings

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Investors are hoping that improving profits at banks will signal the economy is beginning to recover.

Stocks mostly rose Monday, led by financials, after zigzagging in the early going. The Dow Jones industrials gained about 50 points at midmorning.

Banks got a boost after analyst Meredith Whitney said on CNBC that she was upgrading her view on Goldman Sachs Group Inc., which has long been considered the strongest bank amid the economic downturn. She also noted Bank of America Corp., one of the hardest hit by mounting loan losses, could provide value for investors.

Goldman Sachs, Bank of America, JPMorgan Chase & Co., and Citigroup Inc. are all scheduled to report second-quarter results this week. Banks have taken some of the hardest hits among U.S. companies since the recession began in late 2007 as investment and loan losses mounted.

“People are focused on sectors battered the most to see if there is any bounce-back,” said Dan Deighan, founder of Deighan Financial Advisors in Melbourne, Fla. Financial firms and retail companies will probably be the most closely watched industry as earnings are released, he said.

Earnings reports will give investors a chance to see whether there was any meaningful economic improvement during the second quarter, and so far expectations are low. Stocks rallied in the spring amid hope of a recovery in late 2009, but the market has struggled since mid-June as more investors began to doubt that assessment.

In late morning trading, the Dow Jones industrial average rose 50.78, or 0.6 percent, to 8,197.30. The Standard & Poor’s 500 index rose 4.93, or 0.6 percent, to 884.06, while the Nasdaq composite index rose 1.85, or 0.1 percent, at 1,757.88.

Earnings reports are expected from major companies in a range of industries this week, including Dow industrials components Johnson & Johnson, International Business Machines Corp. and General Electric Co. and technology bellwethers Intel Corp. and Google Inc.

New data coming out this week also will offer insight into the economy. Investors will get readings on inflation, retail sales, industrial production and housing starts throughout the week.

Energy stocks fell as oil slid. Light, sweet crude fell $1.38 to $58.51 a barrel on the New York Mercantile Exchange.

Commercial finance lender CIT Group Inc., meanwhile, said it is talking with regulators about ways to improve its short-term liquidity as recent losses may jeopardize its compliance with capital requirements.

Last week, stocks continued a four-week slide as the Dow dropped to 8,147, its lowest level since April 28. Investors have been giving back some of the 40-percent gains picked up during a vigorous rally during the spring. Concerns have been mounting that the rally was overdone and investors are now waiting for fresh signs the economy is actually on the mend instead of just weakening at a slower pace.

Bond prices were little changed Monday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was flat a 3.30 percent from late Friday.

The dollar was mostly lower against other major currencies, while gold prices fell.

About three stocks fell for every two that rose on the New York Stock Exchange, where volume came to 151.7 million shares.

The Russell 2000 index of smaller companies rose 0.41, or 0.1 percent, to 481.39.

Overseas, Japan’s Nikkei stock average fell 2.6 percent. In afternoon trading, Britain’s FTSE 100 rose 1.3 percent, Germany’s DAX index gained 2.1 percent, and France’s CAC-40 rose 1.7 percent.

Copyright 2009 The Associated Press.