The stock market ended higher Wednesday, following the lead of financial stocks as the heads of several big banks testified before Congress about the financial crisis.
Stocks fluctuated for much of the morning but strengthened as the questioning of bank officials proceeded with little in the way of confrontation. Investors were being choosy, moving into consumer stocks in response to a higher profit forecast from Kraft Foods Inc. but selling energy stocks as the price of oil fell. Industries seen as safer in a weak economy, like health care and utilities, rose.
The Dow Jones industrial average rose 70 points in late afternoon trading, while broader indicators also advanced. Treasury prices fell, pushing interest rates higher, after jumping Tuesday.
Executives including Goldman Sachs Group Inc. Chairman and CEO Lloyd Blankfein, JPMorgan Chase & Co. CEO James Dimon, Morgan Stanley Chairman John Mack and Bank of American Corp. CEO Brian Moynihan appeared before the Financial Crisis Inquiry Commission. It is the first meeting of the bipartisan, 10-member panel, which is investigating the near collapse of the financial system in the fall of 2008.
While the executives agreed that banks' actions contributed to the crisis that paralyzed the credit markets and worsened the recession, investors did not hear anything from the hearings that would encourage them to flee financial stocks.
The questions about banks underscored how many concerns investors are juggling. After a strong first week of the year in stocks, a disappointing profit report from Alcoa Inc. late Monday is causing concern that the robust earnings investors had been expecting for the final quarter of 2009 might not materialize.
In much of 2009, companies boosted earnings by laying off workers and slashing expenses. But the benefits of cost-cutting can only go so far, and investors are looking for signs that increases in revenue will lift earnings.
The improved forecast from Kraft was welcome, but its increased projection matches what analysts were already predicting. Intel Corp. is expected to post results Thursday, and JPMorgan Chase & Co. reports Friday.
Far more companies will report earnings next week, which will give investors more signals about the state of the economy's recovery. Later this week, reports on due on retail sales and industrial production that could also direct trading.
Stephen Wood, chief market strategist at Russell Investments, expects improvements in economic and corporate news in 2010 will be incremental and that big gains seen in the market in the past 10 months will taper off.
"This might be like running on the beach with your shoes on. It's going to be a real slog," Wood said.
According to preliminary calculations, the Dow rose 53.66, or 0.5 percent, to 10,680.92. The broader Standard & Poor's 500 index rose 9.97, or 0.83 percent, to 1,145.69, and the Nasdaq composite index rose 25.59, or 1.12 percent, to 2,307.90.
Bond prices fell after jumping Tuesday, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.79 percent from 3.72 percent late Tuesday.
Crude oil fell $1.14 to settle at $79.65 per barrel on the New York Mercantile Exchange. The drop in oil hurt stocks of energy companies.
The dollar fell against most other major currencies, while gold rose.
Meanwhile, investors sold shares of Google Inc. after the Internet search company threatened to withdraw from China after computer hackers had led human-rights activists to reveal their e-mail accounts to outsiders. Google fell $2.91, or 0.5 percent, to $587.57. Shares of China's largest search engine, Baidu, rose $53.08, or 13.7 percent, to $439.57.
Among banks, Goldman Sachs rose $1.31, or 0.8 percent, to $169.13, while JPMorgan rose 88 cents, or 2 percent, to $44.37. Morgan Stanley advanced 18 cents, or 0.6 percent, to $31.31 and Bank of America rose 32 cents, or 1.9 percent, to $16.68.
There is growing public discord over big profits and bonuses at financial companies that has the White House considering a levy on banks to cover about $120 billion in taxpayer losses from the government's industry bailout. Opponents say it could jeopardize a recovery by the nation's biggest banks.
Scott Colyer, chief executive at Advisors Asset Management in Monument, Colo., is concerned that imposing a tax on banks would threaten his expectation for a strong economic rebound in 2010. "You don't want to take money from a group that you're trying to prop up," he said.
Meanwhile, Kraft slipped 3 cents to $29.26.
Chevron Corp. fell 50 cents, or 0.6 percent, to $79.91 as oil dropped.
In economic news, the Treasury Department said the federal budget deficit reached a record in December and that the deficit is growing faster for the first three months of the budget year than in last year's record.
The Federal Reserve said the economy is rebounding in more parts of the county though economic activity remains at a "low level." The Fed's Beige Book provides readings on the U.S. economy by region and precedes the next meeting of the Fed's interest rate policymakers by two weeks.