Dow Closes Higher; Fed Keeps Rate Same

Stocks post a positive session even as a downgrade to Spain's credit rating heightens concerns about eurozone debt levels. After hours, H-P buys Palm. Gregg Greenberg has The Real Story.
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NEW YORK (

TheStreet

) -- The major market averages recaptured a portion of their prior day's losses Wednesday afternoon even as another ratings downgrade in the eurozone

kept sovereign debt worries in the headlines, though the

Federal Open Market Committee

made no move on its key interest rate.

The

Dow

added 53 points, or 0.5%, to 11,045. The

S&P 500

gained 8 points, or 0.7%, to 1191, though the

Nasdaq

went ahead by only a fraction of a point, or 0.01%, at 2472.

Hewlett-Packard

(HPQ) - Get Report

made news after the closing bell, announcing it will acquire

Palm

(PALM)

for $1.2 billion, according to a release. Palm shareholders will get $5.70 a share, or a 23% bump over Wednesday's closing price, while it's believed the deal will close during HP's third quarter. After a momentary halt in trading, shares of Palm were climbing 27% higher in the extended trading session.

S&P lowered Spain's credit rating by one notch to AA, from AA+ with a negative outlook Wednesday, a day after downgrades to

Greece and Portugal triggered a global selloff as investors feared a worsening eurozone debt crisis.

Overseas, Hong Kong's Hang Seng lost 1.5%, and Japan's Nikkei fell 2.6%. The FTSE in London slipped 0.3%, and the DAX in Frankfurt lost 1.2%.

Stocks faltered after news of the downgrade surfaced but stocks resumed higher with the Dow climbing solidly into positive territory, which Lawrence Creatura, vice president and portfolio manager at Federated Clover Investment Advisors, credited to a reporting season characterized by good earnings and even better outlooks.

"Another thing that may be going on is capital may be departing Europe as anxiety over European contagion increases -- that could be another positive factor for markets," Creatura added.

But Ryan Detrick, senior technical strategist at Schaeffer's Investment Research, was less enthused about the mild uptick in most stocks, noting the heavy 200-point Dow drop on Tuesday along with today's light trading volumes.

"Yes, we shook off the Spain news, but I don't think it was the world's most impressive bounce," he said. "The Fed didn't rock the boat, so to speak, which is another positive. But the bigger picture for me: I don't think it's that impressive considering the steep drop we saw yesterday."

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The Economy

The Energy Information Administration said crude oil inventories added 1.9 million barrels in the week ended April 23, which was slightly higher than the 1.4 million barrel build that analysts polled by Platts had been expecting, but less than the increase of 5.34 million barrels reported by the American Petroleum Institute on Tuesday. Gasoline stockpiles unexpectedly shed 1.9 million barrels, dashing analysts' projections for a gain of 500,000 barrels. Distillates supplies, however, showed another 2.9 million barrels, which was higher than the 1.2 million barrel rise expected by analysts.

The

Federal Reserve's

rate-setting arm wrapped up its two-day meeting with the release of its

fed funds rate announcement, which they kept unchanged at near zero. The policymakers highlighted a pick-up in spending, though cited job losses, modest salary bumps and constrained credit as continuing headwinds. The group continued its now familiar language on rates, saying they would stay at "exceptionally low levels... for an extended period," though Kansas City Fed President Thomas Hoenig dissented, again, from that characterization.

Senate Democrats couldn't muster the requisite 60 votes needed to break a

Republican filibuster concerning financial reform legislation, stalling the bill's movement by keeping it off the floor for debate.

Federal Reserve Chairman Ben Bernanke

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Company News

Visa

(V) - Get Report

, like other credit card firms before it this earnings season, beat profit estimates by a nickel after the closing bell at 96 cents a share on a better-than-expected jump in payment volume. Visa posted 71 cents a share in the year-earlier quarter.

Solar panel maker

First Solar

(FSLR) - Get Report

also

topped estimates late Wednesday, and guided higher for the year. Shares were gaining 6.7% in the after-hours session after slipping 0.2% in the afternoon.

Sprint Nextel

(S) - Get Report

reported a first-quarter loss of 29 cents a share in the morning and said it expects both post-paid and total subscriber losses to narrow in 2010 as it introduces new devices. Sprint shares improved 4.2%.

Comcast's

(CMCSA) - Get Report

stock closed 35 cents higher, or 1.9%, to $18.81 after the cable company said spending cuts and modest sales growth helped top analysts' first-quarter profit estimates by a penny.

Hess

(HES) - Get Report

soared past analysts' estimates with first-quarter earnings of $1.65 a share on sales of $9.2 billion. Earlier,

Royal Dutch Shell

(RDS.A)

credited a 57% surge in first-quarter earnings to higher oil prices and improved production.

Shares of

Dow Chemical

(DOW) - Get Report

rose by 5.9% after the company reported better-than-expected earnings for the first quarter and said it is seeing improved consumer spending on cars, electronics and appliances.

Northrop Grumman

(NOC) - Get Report

and

General Dynamics

(GD) - Get Report

also reported better-than-expected first-quarter earnings. Their shares gained 2.2% and 0.6%, respectively.

Health benefits company

WellPoint

(WLP)

said earnings jumped 51% in the first quarter even as membership fell 2.1% year over year.

Medco Health Solutions

(MHS)

, a pharmacy benefits manager, beat earnings estimates and reaffirmed its full-year guidance, highlighted by strong first-quarter volumes. But shares traded 3.9% lower on gross margin concerns,

Reuters

reported.

Honda

(HMC) - Get Report

said strong demand from China and India helped it post a profit of 72 billion yen ($774 million) for the January-March quarter.

Toyota

(TM) - Get Report

issued another recall today, this time for some

50,000 Toyota Sequoia SUV's from the 2003 model-year. The recall was announced because of stability-control system issues. Toyota declined by 0.2% to close at $76.84.

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Commodities and the Dollar

Following the government inventory report, the June delivery crude oil contract settled at $83.22 a barrel, or 78 cents higher.

Elsewhere in commodity markets, the June gold contract gained $9.60 to settle at $1,171.80 an ounce.

The dollar was recently trading lower against a basket of currencies, with the

dollar index down by 0.1%.

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>>The Economy

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>>Treasuries

Treasuries

The benchmark 10-year Treasury weakened 19/32, lifting the yield to 3.765%.

The two-year note slipped 2/32, increasing the yield to 1.032%. The 30-year bond fell 24/32, raising the yield to 4.626%.

--Written by Melinda Peer and Sung Moss in New York

.

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