Stocks hang onto their gains

Wall Street failed Wednesday to extend its big rally for a second day, but it did hold onto Tuesday's gains.

Preliminary closing figures showed the Dow Jones industrials average up 3.91 points or 0.06% to 6930.40; the Nasdaq composite index was up 13.36 points or 0.98% at 1371.64, and the S&P 500 stock index wa up 1.76 points or 0.24% at 721.36.

Selling eased in late afternoon trading despite reports that JPMorgan Chase Chief Executive Jamie Dimon said the bank was profitable in January and February.

JPMorgan has been considered one of the strongest of the big banks. Investors were more surprised on Tuesday when Citigroup said it made money in the first two months of the year.

But even with more welcome news investors remained cautious.

"People are looking past the sizzle and saying where's the steak," said Doug Roberts, chief investment strategist for ChannelCapitalResearch.com. "That is why the market is bouncing around."

Financial stocks that led the market's huge rally Tuesday were mostly up, but off their earlier highs. Tech stocks rose after an analyst raised Hewlett-Packard's rating.

Analysts were again cautioning that the market remains deeply troubled by problems in the banking industry and the impact of the recession on companies in all industries.

"To me, it would be a victory to even close flat today," said Jeff Mortimer, chief investment officer for Charles Schwab Investment Management.

"You need to have another day pass and see how the market likes the 700 level (on the S&P 500 index) and does it still consider it reasonable," he said.

Short-term traders were dominating the market again, analysts said, adding to the choppiness.

Tuesday's rally was primarily a short-covering rally, Mortimer said, and in order for the market to maintain its current levels and move higher, true long-term buyers need to come back into the market. Short covering occurs when investors need to buy stock to replace shares that were borrowed and then sold on expectations of a market decline.

On Wednesday, the head of the Securities and Exchange Commission said the agency "hopefully" will propose next month the reinstatement of the uptick rule, which aims to prevent a massive plunge in stock price fueled by short selling. It expired in 2007 and supporters say its absence has added to the market's volatility.

Advancing issues outnumbered decliners by about 4 to 3 on the New York Stock Exchange, where volume came to 1.12 billion shares.

For there to be a sustained advance, there has to be "many, many days of positive tone and the market interpreting data and news as more positive than negative," said Roman Dubczak, head of equity capital markets at CIBC World Markets.

Bear market rallies can last longer than a single day, said Mike Stanfield, chief executive of VSR Financial Services.

A bear market is defined as a drop of 20% from a market peak; Wall Street does have rallies during bear markets, but they tend to disappear quickly as investors remain pessimistic. Both the Dow and S&P are at levels less than half the record highs they reached in October 2007.

"If you go back a year and a half, every single rally has turned out to be a bear market rally," Stanfield said. "So I think you'd have to guess that this is another (one)."

Investors kept their eyes on the financial industry Wednesday, as many analysts believe it will be the leading indicator of when the market begins to turn around.

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