Stocks Overcome Jitters, End Higher

New York's major averages visit both sides of the flat line as traders digest a host of financial earnings and economic data. Frank Curzio takes his swings in The Real Story (above).
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Updated from 4:12 p.m. EDT

New York's major averages struggled for direction for a good part of the session Tuesday, but they went out higher as investors ultimately decided that mixed news on the corporate and economic fronts tilted toward the positive side.

The

Dow Jones Industrial Average

spent time on both sides of the flat line before finishing 60.41 points higher at 12,362.47. The

S&P 500

added 6.11 points at 1334.43, and the

Nasdaq Composite

ticked up 10.22 points at 2286.04. All three were up by about 0.5%.

Hank Smith, chief investment officer with Haverford Investments, noted that encouraging numbers from both

Charles Schwab

(SCHW) - Get Report

and

M&T Bank

(MTB) - Get Report

, in particular, helped keep some upward pressure on shares.

Mildly positive earnings from Dow component

Johnson & Johnson

(JNJ) - Get Report

also seemed to buoy investor sentiment a bit, considering recent disasters from the likes of fellow industrials

General Electric

(GE) - Get Report

and

Alcoa

(AA) - Get Report

.

J&J posted a first-quarter profit of $3.6 billion, or $1.26 a share -- 6 cents above the consensus estimate. The company also reported better-than-expected sales and upped its 2008 earnings guidance by a penny. Still, shares were down slightly at $65.65.

"I think the enthusiasm was probably overrated," said Edgar Peters, chief investment officer with Pan Agora. "Volume has been thin, and when the volume stays thin, it's definitely not the catalyst everyone's been waiting for."

Smith said that, because J&J ranks among the big companies that should be able to withstand a recession, its numbers helped simply by not being downbeat.

"Their earnings should be more or less impervious to whether we're in a recession or a severe slowdown, and we got confirmation of that," he said. "I think, more broadly speaking, the market's finding a base here, and one encouraging sign is it's able to shrug off some bad news, the GE news notwithstanding. I think we're at the very latter innings of this credit crunch/financial crisis, and the market is prepared to start looking forward again."

Also giving legs to the Dow on Tuesday was

Intel

(INTC) - Get Report

, which ran up 1.1% in heavy volume amid anticipation for its post-bell earnings release. The chipmaker reported

beating on both top and bottom lines

, even as earnings came in lower than last year, and current-quarter sales guidance leaned to the higher end of consensus. After hours, the stock was leaping 6.7% at $22.31.

Overall, breadth was positive in the regular session. Roughly 1.79 billion shares changed hands on the

New York Stock Exchange

, with advancers topping decliners by a 3-to-2 margin. Volume on the Nasdaq reached 1.88 billion shares as winners edged out losers 5 to 4.

As for the erratic trading throughout the session, Jim Paulsen, chief investment strategist with Wells Capital Management, pointed out that, regardless of anything else, fears continue to linger regarding the financial crisis that has been plaguing the market for months.

"That, and in the last several days, there have been these fades," he said. "I think on the floor, if you get a strong rally and things start to fade, you take your money off the table."

Traders were also digesting a surprise uptick in the New York manufacturing sector. The

Federal Reserve

Bank of New York said the Empire State Index came in at 0.6 for April, indicating a slight expansion in the state's factory activity -- well ahead of both last month's reading of negative 22.2, which suggested a significant contraction, and of economists' expectation of minus 17.

Ian Shepherdson, chief U.S. economist with High Frequency Economics, is skeptical about the sharp reversal. "Reports like this give regional surveys a (mostly deserved) bad name," he said in an emailed statement. "It is inconceivable to us that real business conditions have improved to this degree in the NY region over the past month, so we strongly recommend taking no notice at all of the headline number."

Paulsen believes that, if anything, the outlier came in last month's reading. He also remarked that the New York and Philadelphia manufacturing indices appear to have been anomalies compared with the rest of the country, since nationwide manufacturing numbers remain just below the break-even level.

Elsewhere on the economic docket, the Labor Department said March prices at the wholesale level, excluding the volatile effects of food and energy -- the "core" number -- rose an in-line 0.2% from the prior month and 2.7% from a year earlier. Keeping in spiking food and energy costs, the producer price index jumped 1.1% sequentially, compared with a 0.3% rise in February and economists' targets of just 0.6%.

Peters believes that headline number could have helped weigh on stocks, as well, since people have been increasingly concerned about food and energy lately. "I think people put too much weight on the core number," said Peters.

Meanwhile, RealtyTrac reported that March foreclosure filings surged 5% from the prior month, and 57% year over year, to 234,685, or one in every 538 U.S. households. Suffering the most on a proportional basis were Nevada, California and Florida. The latter two states, along with Ohio, had the worst foreclosure totals.

Returning to corporate news,

Northwest

(NWA)

and

Delta

(DAL) - Get Report

finally reached a stock-swap merger deal which, if it closes, will create the world's biggest airline. Northwest holders will get 1.25 Delta shares per Northwest share, representing a 16.8% premium over Delta's Monday closing price.

Further, in a possible resolution to an issue that had threatened to stymie the discussions, the companies said that Delta's pilot leadership has agreed on a post-merger contract. After initial climbs at both stocks, however, Northwest lost 8.4% and Delta slid 12.6% as worries mounted that the deal won't satisfy regulators and unions. According to reports, two of Northwest's largest unions have already announced that they oppose the deal.

Meanwhile, speculation resurfaced that

Continental Airlines

(CAL) - Get Report

and United parent

UAL

(UAUA)

could quickly whip up a merger agreement in order to form a big competing carrier. Shares were down 7% and 5.5%, erasing earlier gains.

Back in earnings, broker Charles Schwab said its bottom line swelled 12% in the first quarter, meeting expectations, even amid the tough economic environment of the past few months. Shares spiked 9%.

A number of regional banks also reported this morning, among them M&T, which advanced 6.3% after its first-quarter operating earnings

grew by nearly 15%

to a better-than-expected $202.2 million, or $1.82 a share.

Regions Financial

(RF) - Get Report

saw a profit drop, but

sailed past estimates

.

U.S. Bancorp

(USB) - Get Report

said earnings sank, though they still

beat by a penny

. Regions stock jumped 8.4%, and U.S. Bancorp shares added 1.7%.

State Street

(STT) - Get Report

, however, plunged 9.9% even after

coming in over targets

as word surfaced that Fitch Ratings is mulling a downgrade after the value of its $75.4 billion investment portfolio slid by $3.16 billion.

Elsewhere in the financial space,

Bear Stearns

(BSC)

disclosed that earnings plummeted 79% in the fiscal first-quarter to $115 million, or 86 cents a share. That had come before March, when a rapid drain in liquidity left the investment bank teetering on the brink of collapse and

JPMorgan Chase

(JPM) - Get Report

took it out in a fire sale. Bear shares lost 1.3%.

Crocs

(CROX) - Get Report

plunged 43.2% to $10.11 after the plastic-shoe maker

sharply took down

its first-quarter earnings guidance. The company, which also plans on shutting its Canadian manufacturing operations, blamed a slowdown in consumer spending.

Oil prices were

on a tear

, hitting a new intraday high of $113.93 a barrel before stepping back to $113.79, a gain of $2.03. Also, according to AAA, national average gas prices at the pump have touched a new record of $3.386.Oil-and-gas stocks

Exxon

(XOM) - Get Report

,

Chevron

(CVX) - Get Report

, and

ConocoPhillips

(COP) - Get Report

all finished up 1% or more.

Gold futures tacked on $3.30 to end at $932 an ounce, and the U.S. dollar was booking gains against both the euro and the yen.

Treasury prices were falling. The 10-year note was down 19/32 in price to yield 3.59%, and the 30-year bond tumbled 1-9/32 in price, yielding 4.43%.

Overseas markets were mostly rising. In Asia, Tokyo's Nikkei 225 climbed 0.6%, and the Hang Seng Index in Hong Kong rose 0.4%. Among European exchanges, the FTSE 100 in London surged 1.3%, Germany's Xetra Dax lifted by 0.5%, and the Paris Cac was up 0.3%.