Optimists win in volatile day on Wall Street

Stocks rebounded somewhat Wednesday on some strong earnings and new takeover deals, but not without a struggle as mounting signs of a tougher lending climate again dogged investors.

Share prices seesawed throughout the session a day after the Dow Jones industrial average tumbled 226 points. Ultimately, the market drew confidence from better-than-expected earnings at Amazon.com and Boeing and from acquisitions involving German engineering company Siemens and drug maker Merck.

Investors, however, continued to worry that worsening conditions for borrowing would cork this year’s heavy stream of deal making. Buyouts usually involve taking on debt, and Wednesday the banks raising funds for an acquisition of Chrysler Group had to postpone a $12-billion debt offering after investors balked at the deal’s terms.

Meanwhile, the National Assn. of Realtors confirmed that the housing market was far from recovery when it reported that sales of existing homes dropped 3.8% in June to the slowest rate in more than four years. The figure was worse than analysts expected.

Wall Street, now at the peak of second-quarter earnings reporting season, has been extremely volatile lately. For seven straight sessions, the stock market has risen one day, fallen the next, then risen again. The net result has been a 1.2% decline in the Dow over that span.

The market might remain rocky as investors try to assess whether problems related to home lending will hurt the broader economy.

“It’s an open-ended unknown, and that’s the problem,” said Richard E. Cripps, chief market strategist for St. Louis-based broker Stifel Nicolaus.

The Dow rose 68.12 points, or 0.5%, on Wednesday to 13,785.07 after trading up more than 100 points and down more than 40.

The Standard & Poor’s 500 index climbed 7.05 points, or 0.5%, to 1,518.09, and the Nasdaq composite index advanced 8.31 points, or 0.3%, to 2,648.17.

The Russell 2,000 index of smaller companies rose 0.64 points, or 0.1%, to 812.50.

Despite the gains in the major indexes, declining issues outnumbered advancers by about 10 to 7 on the New York Stock Exchange. Volume was again extremely heavy.

Treasury bond yields fell after the weak housing data prompted investors to buy safe government assets. The 10-year Treasury note’s yield edged down to 4.9% from 4.91% late Tuesday.

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

Oil prices rallied after the government said supplies of crude fell last week. Oil futures jumped $2.32 to $75.88 a barrel on the New York Mercantile Exchange, bouncing back from two straight days of steep declines.

Despite concerns about waning demand for debt, the acquisitions keep coming.

Siemens, which posted a 54% rise in quarterly earnings, said it would sell its VDO auto parts unit to Germany’s Continental in a $15.67-billion deal and would buy diagnostics company Dade Behring for $7 billion.

Dade Behring soared $18.35, or 33%, to $74.26, and Siemens’ U.S.-traded shares fell $7.86, or 5.4%, to $136.70.

Merck agreed to buy NovaCardia, a San Diego pharmaceutical company with a promising heart disease drug, for $350 million. NovaCardia filed in May to go public.

Merck, one of the 30 Dow companies, advanced $1.66, or 3.2%, to $53.38.

Though a few major companies’ second-quarter earnings have disappointed investors in the last couple of weeks, there was good news Wednesday from corporate bottom lines.

Boeing, the biggest gainer in the Dow, rose $3.43, or 3.3%, to $107.23, an all-time high, after posting a $1.1-billion profit for the second quarter, up from a year-earlier loss. The aerospace company also raised its profit forecast.

Amazon.com rocketed $16.93, or 24%, to $86.18, after the Web retailer said its second-quarter profit more than tripled on strong sales of books, music and electronics worldwide.

Other stocks rising on earnings reports included Colgate-Palmolive, up $1.41, or 2.1%, to $69.66; General Dynamics, up $2.79, or 3.5%, to $83.09; toolmaker Snap-On, up $5.62, or 11%, to $55.61; and insurer Aflac, up $4.29, or 8.3%, to $56.19.

But disappointing earnings drove shares of Xerox down $1.11, or 5.7%, to $18.22; Malibu-based toy maker Jakks Pacific down $4.64, or 16%, to $25.28; and Manhattan Beach-based footwear maker Skechers down $6.06, or 21%, to $22.27.

In other market highlights:

* Shares of some mortgage lenders continued to sink on loan default fears. Countrywide Financial fell 43 cents to $30.07 and IndyMac Bancorp lost $1.05, or 4.3%, to $23.79. But Washington Mutual edged up 29 cents to $39.38.

* Joy Global tumbled $7.11 to $52.45. The mining equipment maker lowered its fiscal-year guidance, citing continuing weakness in the U.S. coal market and certain operational factors.

* Overseas, key stock indexes sank 0.8% in Japan, 0.7% in Britain, 1.5% in Germany and 1.2% in France.