Wall Street gyrated and then steadied itself Wednesday, closing with a respectable advance although the Dow Jones industrials fell as much as 136 points and briefly dropped below the 12,000 mark before recovering.
Stocks bounced back and forth a day after concerns about faltering subprime mortgage lenders sparked a broad selloff. H&R Block Inc. had added to Wall Street’s uneasiness by announcing after the closing bell Tuesday its fiscal third-quarter losses would rise because of a $29 million writedown at its mortgage arm.
The anxiety over mortgage lenders, particularly the subprime lenders that make loans to people with poor credit, pushed the Dow down by more than 240 points Tuesday, its second-biggest drop in nearly four years. Such concerns jostled stocks for much of Wednesday’s session.
“I think the market got below 12,000 and buyers came in,” said Todd Leone, managing director of equity trading at Cowen & Co.
The Dow rose 57.44, or 0.48 percent, to 12,133.40.
The Dow first climbed above the 12,000 level on Oct. 18, after a meandering, 7 1/2 year journey from the 11,000 mark. During that time, Wall Street dealt with the dot-com bust, recession and the aftermath of the 2001 terror attacks. Tuesday’s drop echoed a 416-point drop in the Dow seen two weeks ago that began in part after a nearly 9 percent drop in stocks in Shanghai and amid concerns about subprime mortgages.
Broader stock indicators also rose Wednesday. The Standard & Poor’s 500 index advanced 9.22, or 0.67 percent, to 1,387.17, and the Nasdaq composite index rose 21.17, or 0.90 percent, to 2,371.74.
Bonds fell as stocks bandied about; the yield on the benchmark 10-year Treasury note rose to 4.52 percent from 4.50 percent late Tuesday. Gold prices fell.
Light sweet crude settled up 23 cents at $58.16 per barrel on the New York Mercantile Exchange.
“I think people right now don’t know what to make of this market,” said Larry Peruzzi, senior equity trader at The Boston Company Asset Management. “You look like a hero right now if you bought when the Dow was down 120 points and if you sold you look like a goat.”
Peruzzi said stocks recovered after indexes neared technical levels and that the higher close in crude prices lent a boost to energy stocks. Exxon Mobil Inc. rose $1.11 to $71.02, while ConocoPhillips rose $1.32, or 2 percent, to $67.91.
After Tuesday’s big decline, the market appeared to have been awaiting further economic data — notably Thursday’s producer price index and Friday’s consumer price index — for signals about the economy’s health and whether an interest rate cut might be in the offing. Lower interest rates would make access to capital cheaper and perhaps inject strength in the housing market.
Wall Street’s turbulence came as stocks in Europe closed sharply lower, apparently seeing little room for optimism U.S. markets would rebound. Britain’s FTSE 100 fell 2.61 percent, Germany’s DAX index lost 2.66 percent, and France’s CAC-40 fell 2.52 percent. Japan’s Nikkei stock average closed down 2.92 percent, while Hong Kong’s Hang Sang index fell 2.57 percent and the sometimes volatile Shanghai Composite Index fell 1.97 percent.
The dollar, which was mixed against other major currencies, rose against the yen. Some observers have fingered the ascendent yen with contributing to the volatility seen in recent weeks on Wall Street. A rise in the yen against the dollar stirred concern of a reduction in the so-called yen carry trade, which occurs when investors use the yen to acquire higher-yielding assets elsewhere.
Following Tuesday’s sobering declines in stocks, investors appeared to find little reassurance in a General Motors Corp. report that it turned a profit for the fourth quarter, its first since the first quarter of 2006. GM, which fell 26 cents to $30.25, benefited from a big gain from the sale of about half its stake in its General Motors Acceptance Corp. financing arm.
But trouble at GMAC’s Residential Capital LLC real-estate financing business added to investor concern Tuesday after ResCap said it has struggled with a slower pace of loan originations and a further erosion in its subprime business.
H&R Block, the nation’s largest tax preparer, said it would delay filing its annual report and that the reduced value of its mortgage business pushed its quarterly loss higher. The stock rose 9 cents to $20.14 after spending most of the day lower.
In economic news, the deficit in the broadest measure of foreign trade narrowed by 14.6 percent in the final quarter of 2006 to $195.8 billion, the smallest quarterly imbalance since the summer of 2005. A lower foreign oil bill took received some credit. For 2006, the Commerce Department said the current account deficit, which reflects not only trade in goods and services but also investment flows between countries, set a record for the fifth consecutive year.
The Labor Department said the prices of imported goods rose 0.2 percent in February when excluding oil prices. In January, import prices fell 0.9 percent.
Weighing in again with mortgage data, the Mortgage Bankers Association said Wednesday its weekly mortgage index, which measures mortgage loan application volume, rose 2.8 percent on a seasonally adjusted basis from the prior week. On Tuesday, the group’s report that new foreclosures jumped to their highest-ever level in the fourth quarter of 2006 helped touch off the day’s cavalcade of sell orders.
In other corporate news, Citigroup Inc. rose 33 cents to $49.08 after announcing plans to begin a tender offer for Nikko Cordial Corp. on Thursday after raising its offer for Japan’s third-largest brokerage to quell shareholder opposition.
Lehman Brothers Holdings Inc., the fourth-largest U.S. investment house, credited robust trading and an expansion overseas with driving first-quarter profits. Lehman fell 28 cents to $71.72 on investor concerns the subprime meltdown will hurt financial stocks.
The recent volatility in the U.S. markets, which perhaps normal, has drawn concern from some investors grown accustomed to the calm conditions since U.S. stocks began their steep climb in July. Even before Wall Street’s recent uneasiness, volatility might have been expected to increase as the contract expirations near for stock index futures, stock index options, stock options and single stock futures. Such expirations can bring volatility as investors try to square their options and futures orders.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 2.07 billion shares.
The Russell 2000 index of smaller companies rose 6.56, or 0.85 percent, to 775.68.