Stocks Rise, but Blue Chips Growing Stale

The Dow is giving up gains from earlier in the day, but overall the market was riding higher after a two-day selloff.
By Sarina Penn ,

Updated from 11:19 a.m. EDT

Stocks in New York were on the rise Thursday, though blue-chip indices recently were giving up most of their early gains, following a huge equities selloff over the prior couple of sessions.

The

Dow Jones Industrial Average

rose 8 points to 12,609 -- well off its high for the day. The

S&P 500

ticked up 1 point to 1392, and the

Nasdaq Composite

tacked on 11 points to 2459.

The action came on the heels of a two-day tumble for stocks that robbed the Dow of roughly 430 points, with the

most recent plummet

having been sparked by red-hot oil futures and sobering economic predictions by the

Federal Reserve

.

"It looks like the drop in the Dow down to around the 12,600 level was just enough to attract some buying interest," said Fred Dickson, senior vice president and market strategist with D.A. Davidson. He also pointed out that this is an options expiration week, which usually spurs abnormal volatility.

Investors were finding a bit of relief in commodities, which were at least briefly taking a break from their nearly unremitting run-up over the past few weeks. Crude oil climbed past another new round number this morning, $135 a barrel, but later retreated to a $1.02 loss at $132.15.

"The major worry before was credit, and now it's the impact of rising oil prices on the economy," said Dickson. "We seem to cross one wall of worry only to slam into the next one. But, all things considered, I think equity investors have been braced for the worst, and the market reaction to the spike in oil prices over the past four days has been really muted, and the market appears to be quite resilient. We're not down 1,000 points."

"Our sense is that the market is just marking time, really waiting for a crack in oil prices," he continued. "If we do get that, I think we'll see a very decent market rally."

At the same time, gold futures gave up $8.30 to $920.30 an ounce. The U.S. dollar took back some of its recent losses, adding 0.5% against the euro to $1.5707 and firming by 0.8% against the yen at 103.98.

The sole report on the economic docket was the Labor Department's jobless claims report, which revealed a sharp decline in the number of workers applying for unemployment benefits. Claims in the week ended May 17 totaled 365,000, down 9,000 from the prior week and 8,000 lower than expected.

On the corporate side, Swiss bank

UBS

(UBS) - Get Report

priced a $15.5 billion rights issue 31% below its last closing price on the Zurich exchange, but shares were still picking up 2.2% on the

New York Stock Exchange

.

Automaker

Ford

(F) - Get Report

, meanwhile, said it would

slash overall production

for the rest of the year, impacting its earlier forecast of returning to the black in 2009, as it particularly cuts back on gas-guzzling SUVs and large trucks. Instead, the company will focus on smaller, more fuel-efficient vehicles as consumer demand shifts "quickly" in that direction. Shares were off 8.9%.

Separately, wholesale power-generation outfit

NRG Energy

(NRG) - Get Report

proposed an unsolicited takeout bid of $11 billion for rival

Calpine

(CPN)

, which earlier this year dug itself out of bankruptcy. Shares of NRG slumped 4.2% as Calpine jumped 7.5%.

In earnings,

GameStop

(GME) - Get Report

shares tumbled 10.1%, even though the video-game retailer bumped up its full-year guidance and topped analyst targets for the most recent quarter with more-than-doubled earnings of $62.1 million, or 37 cents a share.

Fellow retailer

Limited Brands

(LTD)

, however, climbed 4.2% after nearly doubling its fiscal first-quarter profit with help from the sale of a joint venture. Adjusted earnings for the company, which operates the Victoria's Secret and Bath & Body Works retail chains, came in ahead of the average Wall Street estimate.

Among other positive retail earnings reports,

PetSmart

(PETM)

beat on both top and bottom lines for the fiscal first quarter, even as it guided under current-quarter projections. Jewelry purveyor

Zale

(ZLC)

widened its quarterly loss, but the results were in line. Shares were up 2.9% and 10.9%, respectively.

On the other hand,

Barnes & Noble

(BKS) - Get Report

cut its full-year guidance for same-store sales, or those for stores that have been open a year or more, to "slightly negative" from "slightly positive," even as the bookseller maintained its 2008 profit outlook. The company also widened its loss by a penny to 4 cents a share, though it was in line with expectations. The stock was hugging the flat line after a morning slide.

Dick's Sporting Goods

(DKS) - Get Report

slid 19.3% after coming in a penny short of per-share expectations for the fiscal first quarter, and women's-apparel seller

Ann Taylor

(ANN)

reaffirmed its full-year outlook, which dips below the analyst consensus. Its shares lost 0.8%.

Treasury prices were plunging. The 10-year note was down 30/32 in price to yield 3.92%, and the 30-year bond sank 1-18/32 in price, yielding 4.64%.

Markets abroad were mixed. The Nikkei 225 in Tokyo added 0.4% overnight, but Hong Kong's Hang Seng Index sank 1.6%. In Europe, the FTSE 100 slipped 0.3%, and Germany's Xetra Dax climbed 0.4%. The Paris Cac was up marginally.

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