Updated from 2:20 p.m. EDT
U.S. stocks overcame a sluggish start Tuesday and closed higher as buying in the financial sector and better-than expected economic data helped traders overlook another gain in oil prices.
Dow Jones Industrial Average
rose 32 points to 11,382, and the
added 5 points at 1285. The
gained 12 points to 2305.
Crude oil continued to weigh on stocks. Recently, oil was up $1.05 to $141.05 a barrel on concern that Israel would bomb Iran over its nuclear program, a move that would cause supply disruptions and potentially stoke a regional conflict in the Middle East. Gold closed down 10 cents at $944.50.
Kenny Landgraf, president and founder of Kenjol Capital Management, said that the run-up in oil and a selloff in overseas markets hurt sentiment. "It's a pretty negative tone coming into the day. You know, 'Why buy stocks?'"
offered traders a reason to buy when it said its June sales fell 8.3% -- better than expectations -- and its stock rose 14%.
announced that June auto sales were down an unadjusted 28%, largely due to slumping truck sales. After falling 5% on its own numbers, shares gained 2.5% on the GM news.
One could argue that low volume from the shortened week could keep investors from taking sides either way, said Richard Sparks, senior equities analyst at Schaeffer's Investment Research. On the other hand, moves could become exacerbated by the reduced volume, he said.
Earlier, some analysts had seen bright spots for the troubled sector, briefly buoying several names. UBS upgraded
to neutral from sell, and Morgan Stanley initiated coverage on
with overweight ratings. Lehman added 5.8%, and Goldman was up 0.7%.
The bullish calls from UBS appeared to gain some traction in the afternoon, sending American Express up 4.5%, Capital One up 4.2%, and Discover Financial up 3.3%.
Similarly, Moody's reaffirmed its A3 credit rating on
with a stable outlook and said the company is well situated. Prudential gained 2.9%.
Several financial firms were working to improve or eliminate their exposure to the housing market.
said it would stop offering its controversial Pick-A-Payment mortgages.
announced it would be selling its home lending business to Lone Star Funds for $1.5 billion in cash and $4.4 billion in debt. The company said it will also get rid of its manufactured housing portfolio to Vanderbilt Mortgage and Finance. CIT said it was seeking to eliminate uncertainty caused by exposure to the housing market. Shares skyrocketed up 27%.
In response to its own credit crunch-related woes, Swiss bank
the resignation of four directors and new corporate governance
. The new structure will draw a clearer line between the responsibilities of the board and those of senior management. UBS remained one of the worst financials, down 5.4%.
Of the raised ratings for the financials, Landgraf said people begin to see value in the sector at these depressed price levels. "Anybody that's trying to go into that area, you're wading into the waters where there's a lot of selling pressure from the hedge funds. We continue to avoid
the sector because there's so many bombs there."
He also pointed out that even analysts can't figure out the financial space. "A lot of guys have tried to find the bottom only to get their hands mashed and bloody," he said. He's waiting for an end to the writedowns and signs that institutional money is going into the space before he gets involved, he said.
A cloud of negativity persisted for other names in the space, as
suffered a Fox Pitt downgrade to in line from outperform. Jefferies and Friedman Billings both cut their price targets for
Standard & Poor's lowered its outlook on a series of banks and financial companies to negative from neutral, warning of additional capital raising and dividend cuts.
Elsewhere, Citigroup initiated bullish coverage on the oil services sector, slapping a hold sticker on
, and putting a buy rating on
National Oilwell Varco
Barring gold companies, the mining sector was taking some knocks as merger activity continued to hum.
was down 5% after the company acquired
, a subsidiary of
IMS International Metal Service
was down 6% after ramping up during Monday trading.
led the index in its decline, losing 3%.
The transportation sector also saw some profit-taking. The Dow Jones Transportation Average lost 2% to 4771.
In technology, telephone company
said that, for a $400 fee, it would offer
without making customers sign up for AT&T service
Apple shares were rising 3.6%, and fellow smartphone maker
Research In Motion
joined it on its trip to the upside, gaining 3.2%.
In the realm of economic data, the June ISM index, which offers nationwide insight into the health of the manufacturing sector, rose to 50.2 from 49.6 in May. Analysts were expecting a reading of 48.6.
"As soon as they came out with that number, all of the indexes kind of jumped back up. That was the main catalyst," Landgraf said. Before the open, it looked like 'Oh no, we're going to get pounded again.'"
The revised number for May construction spending was unchanged at a decline of 0.4%, slightly better than the consensus estimate for a dropoff of 0.6%.
Treasury prices were down slightly. The 10-year note was off 4/32, yielding 3.98%, and the 30-year was down 7/32 to yield 4.54%. The dollar was even against the euro, the yen and the pound.
Abroad, markets were taking a hit. All the major European exchanges, including London's FTSE, Frankfurt's Dax and the Paris Cac were down. In Asia, Japan's Nikkei was off slightly, while Hong Kong's Hang Seng was ticking higher.