Market Keeps Chin Up at the Close

Commodity stocks help lead a late-day market move into positive territory following disappointing news on jobless claims. Simon Constable reviews the action in The Real Story (above).
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Updated from 4:15 p.m. EDT

Stocks in New York finished a touch higher Thursday as investors worked past a disappointing jobless-claims report that had kept the major averages lower for much of the day.

The

Dow Jones Industrial Average

, down more than 100 points earlier, swung higher by nearly 50 points before paring most of those gains to close up 20.2 points, or 0.2%, at 12,626.03. The

S&P 500

rose 1.78 points, or 0.1%, at 1369.31, and the

Nasdaq Composite

added 1.9 points, or 0.1%, at 2363.3.

Robert Pavlik, chief investment officer with Oaktree Asset Management, noted that the relatively lackluster close wasn't surprising, given that the Labor Department is due to release hard jobs data tomorrow morning. "That's such a big, market-moving report," he said. "It's hard to trade or get excited to trade in front of that."

Kenny Landgraf, president and founder of Kenjol Asset Management, agreed. "People are probably still holding back with payroll numbers coming out tomorrow, which tend to be very volatile." He also noted that the S&P is encountering resistance at about the 1380 level, a top that the index hit in February.

Commodity stocks were among the day's best performing stocks. Aluminum maker

Alcoa

(AA) - Get Report

, a Dow component, jumped 5.8%. Seed producer

Monsanto

(MON)

added 5.2% in full recovery from yesterday, when the stock lost ground on a disappointing reiterated outlook, and fertilizer maker

Mosaic

(MOS) - Get Report

ran up 4.3% ahead of tomorrow's scheduled earnings report.

Investors also took solace in a confident statement by

Merrill Lynch

(MER)

CEO John Thain. According to

Bloomberg

, he told the Nikkei news service that the firm has enough capital to offset the need to raise any more money. Merrill shares ended up 1.2% and helped prop up the Amex Securities Broker-Dealer Index, which reversed early losses to add 0.7%.

Overall, stocks' breadth was mixed. Some 3.83 billion shares changed hands on the

New York Stock Exchange

, with advancers outpacing decliners 3 to 2. On the Nasdaq, volume totaled 1.99 billion shares as losers just barely edged out winners.

"With the new quarter, we think people were waiting to buy the beaten-down stuff, and people are finding out they really don't want to be short right now," said Landgraf. He added that recent liquidity-boosting and rate-cut actions by the

Federal Reserve

have helped shore up that sentiment.

Earlier, the market traded erratically in negative territory after the number of people applying for unemployment benefits jumped to 407,000 people last week from the prior week's revised figure of 369,000 -- well over the consensus estimate of 365,000. That's also the worst number since September 2005, when the Gulf Coast was reeling from the devastation of Hurricane Katrina. The four-week moving average for claims climbed by 15,750 to 374,500.

"This is a grim surprise," said Ian Shepherdson, chief U.S. economist with High Frequency Economics. "Claims in excess of 400,000 clearly signal recession, though one week is not a trend."

"We don't take single monthly observations of economic data very seriously, so we have to be even more cautious about over-interpreting weekly numbers," he added. "Still, there is no question this looks very bad indeed."

The fast-approaching release of hard March employment numbers looms large, as well. "If the payroll jobs decline for a third straight month, it will be hard to deny that the economy has entered a recession of unknown depth and duration," said Peter Morici, a business professor with the University of Maryland and former chief economist at the U.S. International Trade Commission.

"Further job losses," he continued, "will indicate problems in the financial sector are damaging the real economy in lasting ways that will take many months, even years, to repair." The data will be out before the open Friday.

Elsewhere on the economic docket, the Institute for Supply Management reported that its non-manufacturing index came in at 49.6 in March, about a point better than consensus estimates and a marginal improvement on the prior month. "In our view," Shepherdson remarked, "the ISM nonmanufacturing survey is not a reliable leading indicator of anything much; we take no comfort from this survey."

Meanwhile, Fed chairman Ben Bernanke returned to Capitol Hill for a

second day of testimony

, this time appearing before a Senate panel to answer more questions on the Fed's role in bailing out

Bear Stearns

(BSC)

. In a prepared statement, Bernanke reiterated that the central bank arranged to fund Bear through

JPMorgan Chase

(JPM) - Get Report

in order to "prevent a disorderly failure of Bear Stearns and the unpredictable but likely severe consequences for market functioning and the broader economy."

In the end, JPMorgan agreed to buy out Bear Stearns for $10 a share in stock -- up from the initial proposal of $2 a share, but still a fraction of what the bank was worth prior to its announcement of severe liquidity problems only a couple of weeks prior. Bear CEO Alan Schwartz told the panel that the crisis stemmed from a "lack of confidence, not a lack of capital or liquidity," as rumors of liquidity troubles at the bank rapidly became "self-fulfilling."

JPMorgan CEO Jamie Dimon, also speaking before the Senate, said that his firm wouldn't have agreed to pick up Bear without the Fed's agreement to absorb billions of possible losses on Bear's assets, while emphasizing that his firm is still responsible for the first $1 billion of those potential losses.

As for the low takeout price, Treasury Undersecretary Robert Steel testified that "there was a view that the price should not be very high," given the involvement of federal funds. Bernanke said the price tag was "a secondary concern" for the Fed, the main one simply being that Bear get assumed by a stronger institution for the greater good of the market.

In corporate news,

Research In Motion

(RIMM)

rose 5.9% after the Blackberry maker reported

better-than-expected fourth-quarter earnings

. Sales roughly doubled to $1.88 billion.

Garmin

(GRMN) - Get Report

lost ground, however, after CFO Kevin Rauckman said the company's first-quarter sales

likely will drop

near 40% from the prior quarter, which had benefited from the holiday season. Shares of the navigational-device maker fell 6.4%.

Fellow tech name

Micron Technology

(MU) - Get Report

widened its fiscal second-quarter loss

amid plunging sale prices for its flash-memory products. A Goldman Sachs analyst lifted the stock's rating to neutral, however, and shares of the chipmaker were up 6.3%.

In other noteworthy analyst actions,

Cisco

(CSCO) - Get Report

was downgraded to neutral from buy at UBS, bringing shares of the networking-gear maker down 2.9%. Retailer

Urban Outfitters

(URBN) - Get Report

lost 3.8% on a cut to market perform from outperform at Morgan Keegan.

Also, Lehman shaved the price targets of Merrill Lynch,

Goldman Sachs

(GS) - Get Report

and Bear Stearns, in the latter case bringing the nearly collapsed bank's valuation down to $10 a share from the prior $110.

Commodities prices were mixed as the U.S. dollar strengthened by 0.1% against the euro at $1.5662 while dipping against the yen by that same ratio. Crude oil lost 98 cents to settle at $103.85 a barrel, and gold futures tacked on $9.40 at $909.60.

Treasury prices were rising. The 10-year note was adding 5/32 in price to yield 3.58%, and the 30-year bond rose 13/32 in price, yielding 4.38%.

Overseas markets were mixed. In Asia, Tokyo's Nikkei 225 spiked 1.5% overnight to 13,390, and Hong Kong's Hang Seng Index gained 1.6% to 24,265. European bourses fared worse. London's FTSE 100, Germany's Xetra Dax and the Paris Cac were all losing at least 0.4% apiece.