Updated from 4:37 p.m. EDT
Stocks in New York closed below their best levels Thursday, but still finished in the green for the third straight time in this holiday-shortened week as oil prices once again recoiled.
Dow Jones Industrial Average
had a choppy morning, then surged by as many as 133 points before backpedaling to end up 52 points, or 0.4%, at 12,646. The
added 7 points, or 0.5%, to 1398, and the
climbed 22 points, or 0.9%, at 2508.
Neil Hennessy, president and portfolio manager with Hennessy Funds, blamed pure emotion for many of the erratic moves early on. "Everybody is trying to figure out where it's going just simply on their gut feelings on a daily basis," he said.
The session saw crude oil deepening its early losses after the government said last week's crude stockpiles had dwindled by 8.8 million barrels. Futures plunged $4.41 to $126.62 a barrel.
"Oil is starting to crack," Hennessy said. "Somebody at some point is going to say, 'Enough is enough.'" He compared oil to housing and technology, two particularly recent examples of boom-and-bust markets. "History is interesting, because it tends to repeat itself," he said.
But Bill Fleckenstein, president of Fleckenstein Capital Management, doesn't believe the "predictable" retreat in oil, following last week's excruciatingly high level of $135, can prop up stocks for very long. Away from that, he said, the yield on the 10-year government bond has climbed to a peak for the year, and the economy continues to weaken in conjunction with worsening inflation.
"Absolutely nothing in that mix is good for stocks other than the belief that they're going higher," he said.
The 10-year note sank 20/32 in price to yield 4.08%, and the 30-year bond tumbled a full point to lift the yield to 4.76%.
Gold futures also fell hard, shedding $23.30 to $881.70 an ounce. The U.S. dollar firmed by 0.8% against both the euro and the yen as the dollar index, which measures the greenback against a basket of other major currencies, spiked 0.7%.
One of the early points of focus was the Commerce Department's second report on U.S. gross domestic product for the first quarter. The initial reading indicated that GDP grew 0.6% from January through March, but the revision showed a 0.9% increase, matching analysts' forecast.
The report will undergo another possible revision before it's finalized, but so far it seems to indicate that the economy managed to avoid contraction in the beginning of the year -- which, if accurate, would run contrary to what many economists have predicted.
"It's pretty hard to have a recession when the economy is expanding by almost a percent," said Richard Yamarone, chief economist with Argus Research. "I don't think we'll knock the cover off the ball in the second quarter, but there are a lot of signs that the economy is actually gathering some footing."
"It defies what everybody's saying out there," said Hennessy. "The economy grew." He also believes that even if the U.S. is still headed for two quarters' worth of contraction -- the generally accepted definition of a recession -- such a recession would be a mild one.
Fleckenstein, however, questions the government's data-collection methods and, in turn, the veracity of its numbers.
He pointed to the example of recent consumer-price index numbers, which he contends belie the severity of the U.S.'s inflation problems. "Does anybody believe that CPI?" he said, "No. It's wrong. And those same types of errors in calculation flow through the GDP accounting."
Separately, the Labor Department said initial jobless claims rose to 372,000, slightly ahead of the 370,000 estimate.
Investors were also dealing with news that Dallas
president Richard Fisher, a member of the central bank's Federal Open Market Committee, said interest rates could be hiked "sooner rather than later" if inflationary expectations continue to worsen, "even in the face of an anemic economic scenario."
The Fed has eased its overnight lending rate by 325 basis points since September. For his part, Fisher has a reputation as an inflation hawk who hasn't always been convinced about the necessity to lower rates.
Stocks' volume, as has been the case over the past few months, was fairly thin. Some 1.92 billion shares changed hands on the
New York Stock Exchange
, and the Nasdaq saw volume of roughly 1.96 billion. Breadth was positive, with advancing issues topping decliners by a 3-to-2 margin.
On the corporate side,
stock leaped as much as 10.5% to an
after executives said the credit-card concern should achieve double-digit revenue growth this year and a double-digit profit climb in the years to come. Shares closed up 7.5% at $308.41.
swung to a surprise loss in the fiscal first quarter. Excluding items, the retailer lost 53 cents a share on dwindling revenue of $11.07 billion. Sears, which operates its namesake chain as well as Kmart, also added $500 million to its stock-buyback authorization. Shares were down 3.6%.
Big-box discount retailer
, meanwhile, said its earnings soared by nearly one-third to $295.1 million compared with a year earlier, when the company's bottom line was weighed down by a hefty charge. Costco topped analyst estimates for earnings and revenue. The stock traded on both sides of the flat line and finished down 12 cents at $73.12.
Shares of Dow component
saw mixed trading following reports that the automaker is considering further restructuring moves, possibly lowering production or cutting unpopular vehicle lines. That follows another report this week that
is looking to cut around 2,000 jobs. GM shares ended up 1.3%.
Elsewhere, media reports said that the chief executives of United Airlines operator
were meeting to discuss their potential merger. UAL shares rose 6.1% as U.S. Airways climbed 5.6%.
shares rose 1.8% to $9.55 after shareholders approved the
all-stock takeout proposal
. JPMorgan added 1.7%.
was a notable loser, sliding 10.4% after the suits purveyor pulled its full-year outlook under the bottom end of its last projected range. The retailer posted a shrinking profit for the most recent quarter and missed analyst targets.
But fellow retailer
, which sells women's apparel, boosted its 2008 guidance to make room for a profit after posting a far narrower quarterly loss than what was anticipated. Previously, breaking even for the year was the best that Coldwater had hoped for. The stock tacked on 6.8%.
The major overseas markets were mainly on the rise. In Asia, Tokyo's Nikkei 225 surged 3% overnight, and the Hang Seng Index in Hong Kong climbed 0.6%. As for European exchanges, London's FTSE 100 ticked down fractionally to 6068, but Germany's Xetra Dax was up 0.3%. The Paris Cac rose 0.1%.