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Stocks Make Peace With Bad News, End Up

The Dow adds 51 points at 13,021. The S&P 500 climbs 11 points to 1418, and the Nasdaq rises 19 points to 2483. Frank Curzio reviews the action in The Real Story (above).

Updated from 4:23 p.m. EDT

Stocks in New York closed on the upside Tuesday as traders looked past a fresh batch of bad news from the financial sector and another record day for oil prices.


Dow Jones Industrial Average

was down more than 100 points this morning, but the index hoisted itself up around midday, and finished ahead by 51.29 points, or 0.4%, at 13,020.83. The

S&P 500

climbed 10.77 points to 1,418.26, and the

Nasdaq Composite

rose 19.19 points to 2,483.31, as both indices booked gains of around 0.8%.

"Now that we've got the bulk of earnings out of the way, and a lot of the uncertainty out of the way, people are more comfortable with this trading environment," said James Park, managing director with Rodman & Renshaw. "There's a lot more confidence in the market, and we're seeing some more cautious buying going on."

Breadth was positive. Roughly 1.92 billion shares changed hands on the

New York Stock Exchange

, and around 2.13 billion traded on the Nasdaq, as each bourse saw winners topping losers by about a 3-to-2 margin.

Paul Nolte, director of investments with Hinsdale Associates, said the economic data from the past 10 days suggest the economy has probably flattened out and that the potential exists for a short and shallow recession.

"I think investors are also anticipating the spending rebates will provide a shot in the arm to the economy in the second and third quarters," he added. "So I think they're ignoring, at this point, the higher energy and commodity prices, at least for now."

Crude oil soared to yet

TheStreet Recommends

another all-time high

of $122.73 a barrel after Goldman Sachs said prices could balloon to between $150 and $200 in the coming six months to two years as supply fails to keep up with demand.

"When the Goldman Sachs report came out, that just gave more psychological support to a market that was already wildly bullish," said Phil Flynn, vice president and senior market analyst with Alaron Trading. "It's almost going beyond reason here."

Flynn remarked that supply concerns of various sorts, as well as the weaker U.S. dollar, are helping feed into the upward drive today. "But it's really a situation where the momentum is so bullish that it's overshadowing every other issue," he said. "It's become sort of a money game right now, and it just isn't going to stop in the near term."

He added: "This could be a blow-up off the top, a final gasp of the market going higher, or it could be that we're never going to come down on oil again."

Crude later stepped back to a $1.87 gain at $121.84. Gold futures, meanwhile, added $3.60 to end at $877.70 an ounce. The U.S. dollar lost 0.3% against the euro to $1.5529 and edged down against the yen.

As for corporate news,

Fannie Mae


was a morning drag as the mortgage buyer

reported a loss

of $2.51 billion, or $2.57 a share, in the latest quarter, after payment of preferred dividends. The firm also said it will cut its dividend and raise $6 billion through share offerings. Shares tumbled out of the gate but recovered to finish up 8.9%.

Fellow government-sponsored mortgage investor

Freddie Mac


tacked on 7.1%, also in reversal from early losses.

Park said when the news in the space is negative, "you see these stocks take a hit, but longer-term investors are coming in and scooping things up." He added that some of the upward action is probably due to traders covering their short positions in the stocks.

In more evidence for the continued slide in housing,

D.R. Horton

(DHI) - Get D.R. Horton, Inc. Report

swung to a

steep first-quarter loss

that was far worse than analysts had anticipated. The stock was down earlier but ended the day higher by 5.5%.

Merrill Lynch


shares remained lackluster recently, however, after news that the government has asked for information about auction-rate securities and the failure of some recent auctions. Shares dipped by a nickel at $51.35.

Elsewhere among financials,


(UBS) - Get UBS Group AG Report

said it

took a loss of $10.97 billion

in its most recent quarter after a $19 billion writedown. UBS also said it would shrink its workforce by 5,500 workers by the middle of next year, including cutting up to 2,600 employees in the investment banking division, and sell $15 billion in troubled mortgage assets to


(BLK) - Get BlackRock, Inc. Report

. UBS shares shed 1.6%.


Legg Mason

(LM) - Get Legg Mason, Inc. Report

slid 10.3% after the asset manager reported a fiscal fourth-quarter shortfall of $255.5 million -- its first-ever quarterly loss -- and set plans to offer 20 million equity units in order to raise $1 billion. Underwriters will have the option to buy another $150 million worth.

On the flip side,

NYSE Euronext's


first-quarter pro forma income soared by 52.5% at $241 million, or 91 cents a share, thanks to

surging trading volume

. The exchange operator also beat on both top and bottom lines. Shares ramped up 7.2%.

Last time out, equity measures closed lower under pressure from crude oil, which got past the $120 mark for the first time ever, as well as the evident disintegration of a proposed merger between


(MSFT) - Get Microsoft Corporation (MSFT) Report





Back on the corporate front, Dow component


(MRK) - Get Merck & Co., Inc. (MRK) Report

announced plans to lay off 1,200 workers, a decision that comes a few days after the Food and Drug Administration rejected the company's new cholesterol drug. Shares eased fractionally at $38.84.

Staying in the health-care sector, Israeli drugmaker


(TEVA) - Get Teva Pharmaceutical Industries Limited Sponsored ADR Report

topped the first-quarter analyst consensus for both sales and adjusted income, but shares still closed off 1.3%.

Barrick Gold


also came in ahead, as did

Anadarko Petroleum

(APC) - Get Anadarko Petroleum Corporation Report

, which crushed the average target by 22 cents a share after stripping out one-time items. Shares were up 1.2% and 9.4%, respectively.

Treasury prices were slipping. The 10-year note was down 7/32 in price to yield 3.90%, and the 30-year bond fell 18/32 in price, yielding 4.64%.

Overseas markets were mixed. Hong Kong's Hang Seng ticked up 0.3% overnight. In Europe, London's FTSE 100 was about flat at 6215. Germany's Xetra Dax and the Paris Cac were losing 0.5% and 0.4%, respectively.