Stocks Reverse Early Losses - TheStreet

Updated from 4:04 p.m. EDT

Stocks managed to recover from early losses Tuesday, ending the day at session highs following solid earnings from

Bank of America

(BAC) - Get Report

and

Johnson & Johnson

(JNJ) - Get Report

.

The

Dow Jones Industrial Average

rose 48 points, or 0.5%, to 9812.98, a new 16-month high. The

Nasdaq

gained almost 10 points, or 0.5%, to 1943.19, while the

S&P 500

climbed 4 points, or 0.4%, to 1049.48.

"This shows how resilient the rally has been and that there's still a good bid underneath the markets, even though we're in this overbought situation," said John Hughes, market analyst at Epiphany Equity Research. "Third-quarter earnings should be pretty good and we are seeing an economic recovery, so that is giving the markets some support."

Advancers and decliners were practically even on the

New York Stock Exchange

, where 1.2 billion shares were traded. On the Nasdaq, three stocks were rising for every two that were down, while 1.7 billion shares traded hands.

Treasuries declined, with the benchmark 10-year note losing 22/32, pushing the yield up to 4.34%.

At the NYSE, financials rose 0.5%, and gained 1.5% on the Nasdaq.

Boosting the sector was Bank of America, which posted a 30% increase in third-quarter profit on higher fees from its mortgages and consumer businesses. The rise was better than analysts' estimates. The third-largest U.S. bank by assets also said it set aside $100 million to cover liabilities related to an investigation into its mutual fund practices. Shares of the bank rose 72 cents, or 0.9%, to $82.46.

Dow-component Johnson & Johnson reported a better-than-expected rise in third-quarter profit to 69 cents a share, from 57 cents a share last year. Gains stemmed mainly from the weaker dollar and the company's drug to treat clogged arteries. Shares of the company advanced $1.10, or 2.2%, to $50.89.

Meanwhile,

Merrill Lynch

( MER) said third-quarter earnings per share rose sharply to $1.04, better than analyst expectations of an increase to 87 cents a share. Merrill ended down 84 cents, or 1.4%, at $58.05 after having gained in early trading.

DirecTV operator

Hughes Electronics

( GMH), a unit of

GM

(GM) - Get Report

, reported a 17% increase in revenue and a 33% rise in operating profit with the help of healthy subscriber growth. The company also increased its full-year 2003 revenue and profit outlook. Hughes rose 5 cents, or 0.3%, to $15.43.

Delta Air Lines

(DAL) - Get Report

posted a third-quarter loss that met analysts' expectations as the company continued with its turnaround strategy. Delta fell 96 cents, or 6.5%, to $13.74.

The data-storage arena was the site of a major acquisition Tuesday.

EMC

(EMC)

said it is buying

Documentum

( DCTM), a maker of document management software, for $1.7 billion in stock. The purchase is expected to shave 2 cents per share off EMC's first-quarter earnings in 2004, while adding to the company's profit in 2005. The maker of data-storage systems also said third-quarter earnings will be higher than analysts' forecasts. EMC lost $1.11, or 7.7%, to $13.34, while Documentum gained $4.12, or 16.9%, to $28.54.

Bellwether chipmaker

Intel

(INTC) - Get Report

reported third-quarter results after the closing bell, along with

Novellus

(NVLS)

and

Teradyne

(TER) - Get Report

. Intel rose 28 cents, or 0.9%, to $31.08.

While companies were actively reporting earnings, analysts were busy issuing research calls. A.G. Edwards downgraded

Amgen

(AMGN) - Get Report

to hold from buy on worries the biotech company may be facing varied risks, including patent erosion, heavy competition and deteriorating growth in a few drugs. Amgen dropped 33 cents, or 0.5%, to $66.81.

Morgan Stanley cut its first-quarter revenue estimates for

Applied Materials

(AMAT) - Get Report

on concerns the company would likely overestimate its sales performance for the quarter. But the firm raised its price target on the stock to $25 from $21 based on the company's recovering fundamentals. Shares lost 9 cents, or 0.4%, to $20.91.

Merrill Lynch resumed coverage of storage companies

Brocade

(BRCD)

with a sell rating and

McData

( MCDT),

Network Appliance

(NTAP) - Get Report

,

QLogic

(QLGC)

,

Storage Tech

(STK) - Get Report

and

Veritas

(VRTS) - Get Report

with a neutral rating.

The dollar was strengthening against the yen and euro on hopes of a strong U.S. economic recovery. Crude oil futures were lower in London.

Overseas markets were mostly lower, with London's FTSE 100 down 0.7% at 4334 and Germany's Xetra DAX down 0.1% at 3535. In Asia, Japan's Nikkei closed 1.7% higher at 10,966, while Hong Kong's Hang Seng fell 0.9% to 11,856.

On Monday, the major averages finished near 52-week highs. The Dow rose 89 points, or 0.9%, to 9764.38. The Nasdaq gained 18 points, or 1%, to 1933.53, while the S&P 500 advanced 7 points, or 0.7%, to 1045.35.