Wall Street Edges Higher in Last Hour

After an early rally and a midday reversal, stocks in New York now trade with modest gains as enthusiasm over new initiatives at Citigroup and Bank of America fade.
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Updated from 1:48 p.m. EST

After zigzagging above and below even throughout the day, stocks in New York were on the rise in the final hour of trading, as investors came to terms with fourth-quarter earnings reports and some big changes in the banking sector.

The

Dow Jones Industrial Average

was rising 70 points at 8288, and the

S&P 500

was higher by 5 points at 849. The

Nasdaq

was up 14 points at 1526.

The financial sector's multibillion-dollar losses and skepticism about its inability to function without more government has kept pressure on the market today, with

Bank of America

(BAC) - Get Report

and

JPMorgan

(JPM) - Get Report

at the forefront of declines on Friday.

Of the news in financials,

Citigroup

(C) - Get Report

reported a fourth-quarter loss of $8.29 billion early Friday and said it will split its operations in two, separating its traditional banking business from its riskier assets. The disassembly follows a deal earlier in the week to combine its brokerage business with

Morgan Stanley

(MS) - Get Report

.

Meanwhile,

Bank of America

sprung early results on investors. The bank lost $2.39 billion, or 48 cents a share, in the fourth quarter. The bank has struggled to swallow the acquisitions of Countrywide and in particular Merrill Lynch, which lost a record $15.31 billion in the quarter, and will now receive an additional $20 billion in support from the government.

Shares fell nearly 14% and were leading the decliners on the Dow. "It's a collapse of confidence," says, Bernie McGinn, founder of McGinn Investment Management.

Now investors are legitimately questioning whether Bank of America CEO Ken Lewis made a good decision in buying Merrill Lynch, says McGinn."You begin to question to the quality of management because in all of these high-profile shopping sprees, he's putting investors at risk."

This in particular has stung investors because "now it's the good banks," says McGinn. "The question now is when is this all going to end --when are banks going to stop needing capital, and when is the government going to need to stop giving it to them."

In a similar fashion to the deal the government struck with Citi last fall, the loans to BofA will guarantee up to $118 billion in losses on loans and securities backed by residential and commercial real estate.

Also making adjustments on Friday, Switzerland's

UBS

(UBS) - Get Report

said it is selling parts of its

commodities business

to

Barclays

(BCS) - Get Report

for a yet-to-be-determined sum.

In other earnings,

Sony Ericsson

reported a fourth-quarter loss of $245 million, as consumer demand slacked.

Some of the day's most dismal news came via electronics retailer

Circuit City

(CC) - Get Report

, which said it will liquidate its remaining stores. The move could eventually add another 35,000 employees to the already staggering unemployment figures stemming from the economic downturn.

President-elect Barack Obama said in a press conference Friday that his stimulus package, dubbed the American Recovery and Reinvestment Plan, will create or save 3 million to 4 million jobs.

"Economists from across the political spectrum tell us if nothing is done this recession could linger for years," said Obama, who takes office next week. "The first job of my administration is to put people back to work and get our economy moving again."

The stimulus package, estimated to cost around $850 billion, will double the product of renewable energy, among other things. That process alone should put half a million people to work, according to the president elect. "If we don't act now, because of the economic downturn, half of the wind projects planned for 2009 could be abandoned," he said.

The Labor Department said Friday that consumer prices dropped by 0.7% in December, a slightly less steep drop than the 0.9% decline economists expected. For the year, consumer prices nudged up 0.1%, the smallest change since 1954, when consumer prices fell by 0.7%. Prices rose 4.1% in 2007. The year-over-year change occurred because of the sizable declines in energy prices in recent months.

Oil prices

added $1.11 to settle at $36.51 a barrel, after a multiday tumble. In a report on Friday, the International Energy Agency predicted that the worsening global economy will leave demand at 85.3 million barrels a day, a 0.6% decline from 2008.

The IEA also issued a statement on Friday with regard to the Russia/Ukraine gas dispute. The agency said it "is deeply concerned about the lack of ability of both Gazprom and Naftogaz of Ukraine to resume delivery of gas to Europe, despite an agreement to do so brokered by the European Union and signed by all parties last Monday."

Many consumers have been left without gas for two weeks because of the disagreement. "Industries are being closed at a time of already poor economic conditions; domestic and other consumers are suffering real hardship," wrote the EIA.

In other commodities, gold rose $32.60 to $839.90 to settle at an ounce.

Longer-dated Treasuries fell Friday; the 10-year note gave up 1 02 to yield 2.3%, the 30-year was down 0-06, yielding 2.87%.

The dollar was weaker against the euro, pound and stronger against the yen.

Overseas, the FTSE in London and the DAX in Frankfurt were both edging higher after Japan's Nikkei Hong Kong's Hang Seng ended with gains.

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