Stocks stage a modest rebound after up-and-down day

NEW YORK -- The stock market managed another comeback Friday, rebounding from early losses for a second day and posting a moderate advance.

Investors spent the session struggling with concerns about turmoil in the banking industry and its impact on the economy. But they also were willing to place bets on a range of consumer and industrial stocks.

Many financial stocks are down in response to rising losses at Citigroup and Bank of America. But investors were also heartened by the companies' plans to return to profitability.

At the close, preliminary figures showed the Dow Jones industrial average up 68.73 at 8,281.22 after it fell more than 100 points earlier in the session. Broader indicators also closed higher.

Bank of America reached a deal late Thursday to receive an additional $20 billion in capital from the government. The bank will also receive guarantees to cover up to $118 billion in losses on loans and securities backed by residential and commercial real estate as it incorporates recently acquired Merrill Lynch into its operations.

Bank of America's deal with the government is similar to one Citigroup reached with the government last fall.

John Merrill, chief investment officer of Tanglewood Wealth Management, said the change in direction Friday was not surprising.

"Every time the government does something, there is an initial and fleeting excitement this will help," Merrill said. "But (investors) look deeper and see, wow, this is a mess."

Citigroup, among the hardest hit by the ongoing credit and mortgage market turmoil, said it plans to split in two, separating its traditional banking business from its riskier operations. Earlier in the week, Citi agreed to sell a majority stake in its brokerage business to Morgan Stanley as it looks to streamline operations and shed assets

Citi said it lost $8.29 billion, or $1.72 per share, during the final three months of the year. Bank of America said it lost $2.39 billion, or 48 cents per share.

Bank of America shares tumbled 90 cents, or 10.8%, to $7.42. Shares of Citi fell 4 cents to $3.79.