Stocks rebound as traders look to upbeat earnings

Investors set aside worries about bank earnings Wednesday to focus on upbeat reports from industrial and technology companies.

Stocks fell in early trading only to pull higher in the late morning, as they did on Tuesday when Treasury Secretary Timothy Geithner reassured investors about the health of banks’ balance sheets.

On Wednesday, dissipating worries about Morgan Stanley’s weaker-than-expected results made it easier for investors to respond to better earnings news from AT&T Inc., Boeing Co., McDonald’s Corp. and Yahoo Inc.

“We’re starting to see a little light at the end of the tunnel,” said Frank Ingarra, co-portfolio manager at Hennessy Funds, referring to some of the recent earnings data. “The challenge is I don’t know how long the tunnel is.”

In midday trading, the Dow Jones industrial average rose 52.89, or 0.7 percent, to 8,022.45. It was the first move above the 8,000 mark since Monday, when stocks tumbled on worries about bank balance sheets.

Broader stock indicators also rose. The Standard & Poor’s 500 index rose 8.67, or 1 percent, to 858.75, and the Nasdaq composite index rose 28.37, or 1.7 percent, to 1,672.22.

Morgan Stanley fell 45 cents to $24.20 after reporting it lost $578 million and reduced its dividend. The company said it was hurt in part by a deteriorating commercial real estate market. The bank’s loss to common shareholders totaled 57 cents per share for the January to March period. That was wider than the per-share loss of 8 cents analysts had expected.

Morgan’s report was important because it interrupted a string of better-than-expected results from banks that suggested some of their problems were easing. Banks have largely dictated the stock market’s direction since last fall, when the collapse of Lehman Brothers Holdings Inc. shocked the financial system. Analysts say it’s crucial that banks become more stable and resume normal levels of lending in order for the economy to recover.

AT&T said strong results from its wireless business softened the effect of the weak economy and helped the country’s biggest telecommunications carrier beat analyst estimates for the first quarter. The stock rose 78 cents, or 3.1 percent, to $26.06.

McDonald’s rose 38 cents to $56.01 after saying its first-quarter profit climbed nearly 4 percent. Earnings of 87 cents per share topped the 82 cents per share figure Wall Street had been expected.

Wells Fargo & Co., which bought Wachovia last fall at the height of the credit crisis, said it earned $2.38 billion. That compares with a profit of $2 billion a year earlier. Wells rose $1.20, or 6.4 percent, to $20.01.

Boeing said its first-quarter earnings fell 50 percent, partly because of planned production cuts as airlines postpone deliveries of new planes. The world’s second-largest plane maker also lowered its forecast for the year. The stock rose $1.34, or 3.7 percent, to $37.99.

Yahoo rose 50 cents, or 3.5 percent, to $14.88 after saying it would lay off nearly 700 workers. The company’s earnings fell 78 percent to $118 million for the first three months of the year.

Continental Airlines Inc. fell 74 cents, or 4.9 percent, to $14.26 after reporting it lost $136 million in the first quarter as traffic fell and business travelers saved money by moving from first-class to the coach cabin.

In other trading, the Russell 2000 index of smaller companies rose 8.88, or 1.9 percent, to 478.93.

About five stocks rose for every two that fell on the New York Stock Exchange, where volume came to 606.9 million shares.

Bond prices fell, sending the yield on the 10-year Treasury note up to 2.94 percent from 2.90 percent late Tuesday. The yield on the three-month T-bill rose to 0.15 percent from 0.13 percent Tuesday.

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

Light, sweet crude fell 33 cents to $48.22 a barrel on the New York Mercantile Exchange.

Overseas, Japan’s Nikkei stock average rose 0.18 percent. In afternoon trading, Britain’s FTSE 100 rose 1.1 percent, Germany’s DAX index rose 2.1 percent, and France’s CAC-40 rose 1.7 percent.

Copyright 2009 The Associated Press.