Stocks opened sharply lower Thursday before staging a stunning comeback as investors snapped up some of the financial sector's stronger players and pumped money into raw-material and transportation shares. The Dow Jones industrial average rose more than 160 points.
A drop in crude oil below $101 a barrel helped reverse the stock market's early losses, particularly among automaker and transportation stocks such as railroad CSX, FordMotor and General Motors.
Early in the day, most bank stocks fell on nervousness about Lehman Bros. Holdings' announcement early Wednesday that it planned to sell its investment management unit and spin off its commercial real estate assets. The company is seeking to raise capital after making bad bets on holdings tied to real estate.
Traders and analysts appeared unimpressed with the steps outlined by the nation's No. 4 investment bank, punishing the stock. Citigroup and Goldman Sachs lowered their ratings on the stock to "hold" from "buy." Lehman fell $3.03, or 42%, to $4.22.
"The steps they're taking are being seen by Wall Street as too little, too late," Arthur Hogan, chief market analyst at Jefferies & Co., said of Lehman. "You're looking at a company that was a $10-billion company last week [and] is a $3-billion company today."
But later in the day, major financial names including JPMorgan Chase, Wells Fargo and even embattled Washington Mutual soared.
"Not everybody's in trouble, and people are realizing that," said Anthony Conroy, managing director for BNY ConvergEx Group. But the market, he added, is very rumor-driven right now, making for exaggerated price movements.
The Dow rose 164.79, or 1.5%, to 11,433.71 after being down 170 points in the early going.
Broader stock indicators rose. The Standard & Poor's 500 index rose 17.01 points, or 1.4%, to 1,249.05, while the Nasdaq composite index rose 29.52 points, or 1.3%, to 2,258.22.
Despite the gains in the major indexes, declining issues outnumbered advancers by about 9 to 7 on the New York Stock Exchange.
The Russell 2,000 index of smaller companies rose 1.84 points, or 0.3%, to 719.
A few marquee financial names on Wall Street logged steep declines as investors worried about the health of their balance sheets. Merrill Lynch fell $3.87, or 17%, to $19.43, and Wachovia dropped 80 cents, or 5.3%, to $14.28.
