Stocks closed higher as investors snatched up shares of consumer product makers and financial companies Wednesday as they latched onto signs that the recession could be easing its chokehold on the economy.
Early caution gave way to a rally in the last hour of trading as investors looked for stocks that could benefit from a rebound. Technology stocks lagged after Intel's tightlipped forecast caused jitters about a corner of the market that had drawn buyers over the past month.
Money flowed into stocks like Procter & Gamble, which boosted its dividend, and American Express, which said it is having to write off less bad debt.
"The market may not be seeing concrete signs of a recovery, but there are specks of light that we're on the road to stabilization," said Ryan Larson, senior equity trader at Voyageur Asset Management.
According to preliminary calculations, the Dow Jones industrial average rose 109.44, or 1.4%, to 8,029.62.
The Standard & Poor's 500 index rose 10.56, or 1.3%, to 852.06. The tech-heavy Nasdaq composite index edged up 1.08, or 0.1%, to 1,626.80 after losing ground for most of the day because of disappointment about Intel's report.
More than two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.5 billion shares.
Lackluster economic readings early in the day offered reminders of the economy's troubles. But other signs emerged that the economy could be stabilizing as the day wore on. That idea that the recession is at least not worsening has pushed stocks up by more than 20% in the past five weeks.
The government reported that production at the nation's factories, mines and utilities fell 1.5% in March, the fifth straight month of decline and worse than the 1% dip analysts expected.
Consumer prices fell 0.1% last month as a drop in energy prices offset the biggest rise in tobacco prices in more than a decade. It was better than the 0.1% rise economists had expected but still reflected weaker business activity.
Other economic reports that came out in the afternoon offered some bright spots that the market responded to. The Federal Reserve's snapshot of business conditions around the nation suggested that while the economy remains troubled, some areas like manufacturing were stabilizing.
The National Association of Home Builders said its housing market index posted its biggest one-month gain in five years in April as many homebuyers jumped on lower prices and incentives.
American Airlines parent AMR Corp. jumped 19% after the carrier's $375 million loss for the first quarter wasn't as bad as analysts had feared.
American Express said in a regulatory filing that had to write off a smaller percentage of loans in March than in February. Amex's 12% rally was the biggest advance among the 30 stocks that make up the Dow industrials.
Trading volume was light, which can amplify swings in the market, and some buyers may have been ready to pounce following a 2% slump a day earlier. Market watchers said this kind of back-and-forth is likely to continue as companies continue to report results from the first three months of the year.
Traders have been hesitant to continue the buying spree that began in early March without more convincing signs that the economy is stabilizing or until companies signal they have seen the worst of a recession now in its 17th month.
David Kelly, chief market strategist at JPMorgan Funds, said it could take months for investors to get a better sense of whether the economy has managed to break its slide.
"It's like April weather," he said. "Some days it will seem an awful lot like winter and other days it will feel like spring."
Investors bought industrial stocks after cost-cutting at CSX Corp. helped the railroad operator post better-than-expected earnings for the first three months of the year. The stock rose 7.8%.
Consumer staples stocks — considered a refuge during recessions — posted some of the biggest gains. Procter & Gamble, the maker of Tide detergent and Crest toothpaste, rose 3.2% after boosting its quarterly dividend by 10%, to 4 cents.
Home builders rose after the report on builder sentiment. Hovnanian Enterprises jumped 21.4%, while Toll Brothers rose 2.7%.
Intel pushed tech companies lower. The chipmaker's earnings came in well ahead of expectations and the company said personal computer sales have "bottomed out." Investors were unnerved, though, by Intel's decision not to provide a detailed revenue forecast. The company said the economy makes it too hard to accurately predict results. The stock fell 2.4%.
"We're going to continue to get bad news," said David Hefty, chief executive of Cornerstone Wealth Management in Auburn, Ind. Hefty noted though, that investors are less swayed right now by fundamentals in the economy and more by the momentum of the market.
In other market moves, the Russell 2000 index of smaller companies rose 7.91, or 1.8%, to 461.13.
Bond prices rose, pushing the yield on the 10-year Treasury note down to 2.77% from 2.79% late Tuesday.
The dollar was mixed against other major currencies, while gold prices rose.
Overseas, Britain's FTSE 100 fell 0.5%, Germany's DAX index lost 0.2%, and France's CAC-40 fell 0.5%. Japan's Nikkei stock average fell 1.1%.