Wall Street finished a back-and-forth session higher Monday as investors overcame some of their nervousness about the credit markets and uneven earnings and found solace in the technology sector.
Several companies including drug maker Merck & Co. reported decent third-quarter results, but investors were unhappy with rival drug maker Schering Plough Corp.’s results. They were also mindful of the downbeat profit outlooks from several blue chip companies last week.
Still, after an early slide, the market seemed to grow optimistic about Apple Inc.’s earnings, which were scheduled to be released after the closing bell. That sent tech stocks higher, and by early afternoon, other stocks were tagging along.
Disappointing earnings and Standard & Poor’s downgrade of another series of mortgage-backed securities sent stocks plunging Friday, taking the Dow Jones industrials down 366 points.
“It is not unusual for a big down day to be followed by an up day. I think the bargain hunters are out there,” said Brian Gendreau, investment strategist for ING Investment Management. “It seems there’s fairly strong demand out there, despite all the bloodletting on Friday.”
He noted that while some big-name companies’ results have disappointed Wall Street, about two-thirds of earnings so far have beat estimates and outlooks remain upbeat for the technology and health care sectors.
According to preliminary calculations, the Dow rose 44.95, or 0.33 percent, to 13,566.97, after falling more than 100 points early in the session.
Broader stock indicators finished higher, with tech stocks leading. The S&P 500 index rose 5.70, or 0.38 percent, to 1,506.33, and the technology-dominated Nasdaq composite index rose 28.77, or 1.06 percent, to 2,753.93.
The Russell 2000 index of smaller companies added 11.29, or 1.41 percent, to 810.08.
Advancing issues outnumbered decliners by about 9 to 7 on the New York Stock Exchange, where volume came to 1.39 billion shares, compared with 1.79 billion shares traded Friday.
Treasury bonds were little changed after Friday’s steep gains. The yield on the 10-year note, which moves inversely to its price, was flat at 4.40 percent.
On Friday — the 20-year anniversary of the Black Monday crash — investors sold off stocks and bought up safer assets like U.S. Treasury bonds as the prospect of a thaw in the frozen credit markets grew dimmer.
Though the major U.S. stock indexes showed signs of strength Monday, there are still big worries on Wall Street about how problems in the financial markets might drag on corporate and economic growth — concerns that make the record highs reached last week by the Dow and the Standard & Poor’s 500 index appear unreasonable.
“It may take a little time here, a week or two, of trying to heal,” said Steven Goldman, chief market strategist at Weeden & Co.
Overseas markets were unsettled, responding to Friday’s drop on Wall Street. In Asian trading, Japan’s Nikkei stock average declined 2.24 percent, while Hong Kong’s Hang Seng index dropped 3.7 percent. In later European trading, Britain’s FTSE 100 fell 1.05 percent, Germany’s DAX index fell 1.13 percent, and France’s CAC-40 fell 1.38 percent.
“People are worried there are more time bombs out there,” Gendreau said. He posited that a big reason the market sold off as sharply as it did last week was because fund managers wanted to lock in positive returns for the year before any more bad news hits.
Over the weekend, the world’s economic leaders not only said that smoothing the turbulent global financial markets will require vigilance, but they also warned of inflation risks — which puts central banks like the U.S. Federal Reserve in a tight spot. The Fed lowered interest rates on Sept. 18 to make borrowing cheaper amid a growing credit market crisis, and Wall Street hopes policy makers reduce rates again when they meet next week.
Fed Governor Randall Kroszner at a speech in Washington reaffirmed that the central bank will “act as needed” to calm the financial markets. He also said problems with structured credit products — which dampened the profits at several banks in the third quarter — are recovering, but gradually.
Most major companies reporting earnings Monday posted solid increases in income, but Schering-Plough’s profit gain fell short of expectations. The drug maker fell $4.37, or 13.4 percent, to $28.34.
Crude oil futures settled down $1.04 to $87.56 a barrel on the New York Mercantile Exchange. Gold also declined, while the dollar rebounded sharply against several major currencies.