Wall Street has managed its second straight comeback, but the rebound was more a sign of the market's turmoil than strength.
Stocks closed moderately higher Friday after an erratic session that had investors tussling with concerns about the ongoing problems in the banking industry in response to more billion-dollar losses at Citigroup Inc. and Bank of America Corp. Yet investors were also heartened by plans for both banks to restore themselves to profitability, and they were also willing to place bets on a range of consumer and industrial stocks.
"It's that tug of war between problems and promise," said Alan Gayle, senior investment strategist at RidgeWorth Investments. "I think there is a bit of a sigh of relief that there is assistance coming for Citi and Bank of America, but it seems like there is an ongoing need for this assistance."
The companies' fourth-quarter losses — Citi said it lost $8.29 billion, while Bank of America lost $2.39 billion — were sobering reminders that the sagging economy is aggravating the problems that began with the mortgage crisis in 2007.
Still, the market drew some reassurance from the fact that Bank of America reached a deal late Thursday to receive an additional $20 billion in capital from the government. The bank will also receive guarantees to cover up to $118 billion in losses on loans and securities backed by residential and commercial real estate as it incorporates recently acquired Merrill Lynch & Co. into its operations. Bank of America's deal with the government is similar to one Citigroup reached with the government last fall.
Meanwhile, Citigroup, among the hardest hit by the ongoing credit and mortgage market turmoil, said it plans to separate its traditional banking business from its riskier operations. Earlier in the week, Citi agreed to sell a majority stake in its brokerage business to Morgan Stanley as it looks to streamline and shed assets.
Amid the uncertainty about financials, investors were buying consumer stocks like Wal-Mart Stores Inc., McDonald's Corp. and Procter & Gamble Co. Some tech stocks were among the gainers, including Intel Inc. and Microsoft Corp. After two weeks of selling, many stocks are looking much more attractive.
According to preliminary calculations, the Dow Jones industrial average rose 68.73, or 0.84 percent, to 8,281.22. The Dow was down 103 points in early afternoon; on Thursday, it recovered from a 205-point loss to close up 12.35.
The Standard & Poor's 500 index rose 6.38, or 0.76 percent, to 850.12, while the Nasdaq composite index rose 17.49, or 1.16 percent, to 1,529.33.
Many financial stocks are down in response to rising losses at Citigroup Inc. and Bank of America Corp. But investors were also heartened by plans by Citigroup and Bank of America aimed at restoring them to profitability.
The Labor Department said the consumer price index fell 0.7 percent in December as energy prices slid. Economists polled by Thomson Reuters forecast a 0.9 percent drop. For the full year, prices rose just 0.1 percent — the smallest gain since prices actually fell in 1954.
Meanwhile, the Federal Reserve said industrial production from the nation's factories, mines and utilities fell a larger-than-expected 2 percent in December. Economists expected a 1 percent.
Advancing issues outnumbered advancers by about 2 to 1 on the New York Stock Exchange, where volume came to 1.19 billion shares.
The Russell 2000 index of smaller companies rose 3.55, or 0.77 percent, to 466.17.
Oil prices rose $1.11 to settle at $36.20 a barrel on the New York Mercantile Exchange. The dollar mostly fell against other major currencies, while gold prices rose.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.34 percent from 2.20 percent late Thursday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.13 percent from 0.10 percent late Thursday.
Overseas, Japan's Nikkei stock average rose 2.6 percent. Britain's FTSE 100 gained 0.9 percent, Germany's DAX index rose 0.7 percent, and France's CAC-40 was rose 0.7 percent.