Stocks recover after roller-coaster session

NEW YORK (CNNMoney.com) -- Stocks snapped back Wednesday, finding momentum at the end of a volatile session, as investors wrestled with the subprime mortgage crisis and their desire to put money back to work after the recent selloff.

The Dow Jones industrial average (up 57.44 to 12,133.40, Charts) climbed about 0.5 percent after earlier sinking below 12,000 for the first time since November.

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The broader S&P 500 (up 9.22 to 1,387.17, Charts) index added 0.7 percent, and the Nasdaq (up 21.17 to 2,371.74, Charts) composite added 0.9 percent.

"People are trying to figure out whether subprime is the Achilles heel of the economy," said Charles Smith, chief investment officer at Fort Pitt Capital Group. "Until we get a sense of just how severe the impact is going to be, we're going to keep seeing this volatility."

All three major gauges had moved in and out of the plus column throughout the session Wednesday. Stocks were hit the hardest in the early afternoon, with the Dow losing more than 130 points before clawing back and turning higher late in the session.

Technology led the recovery, with large, heavily traded stocks bouncing back, sparking a broader recovery. Microsoft (up $0.68 to $27.40, Charts), Dell (up $0.53 to $22.32, Charts), IBM (up $1.05 to $93.76, Charts) and eBay (up $0.73 to $31.14, Charts) were among the stocks rising. In addition, some of the recently hard-hit financial stocks bounced back.

The session's volatility was partly because of Friday's quadruple options expiration, a quarterly event in which stock index futures and options and individual stocks futures and options all expire at the same time. The process can cause volatility in the underlying issues.

After the close, federal authorities said that Chiquita Brands International (Charts) has been charged with dealing with a terrorist organization. (Full story).

Bear Stearns and Nortel are due to report quarterly earnings Thursday morning.

Thursday also brings the release of the February Producer Price Index, the weekly jobless claims and the March Philadelphia Fed index.

Stocks have had a tumultuous two weeks, as investors have attempted to process and move beyond the global market sell-off of Feb. 27. On that day, the Dow lost 416 points, seeing its worst day since the market reopened after the Sept. 11, 2001 attacks.

The Dow hit an all-time high less than a month ago, topping out at slightly less than 12,800 on Feb. 20 during the session, before closing at 12,786.64. But analysts say the blue-chip barometer is unlikely to revisit that high any time soon.

All three major gauges tumbled about 2 percent Tuesday as worries about subprime lending and the economy sparked the second-worst sell-off of the year.

The worries continued to play a role Wednesday as investors remained concerned about how badly problems with subprime loans - made to borrowers with weak credit - will hurt the already troubled housing market and, by extension, the economy. Subprime lenders have seen a spike in defaults on loans.

In general, "we've gone from a very optimistic market a month ago to a skeptical market and I don't think this will be over quickly," said Robert S. Gay, managing partner at Fenwick Advisors. "I think we're going to see this for several months."

Nonetheless, after the most recent sell-off, investors opted to move back into stocks in the late afternoon.

A few subprime stocks bounced back after Tuesday's sell-off, including Accredited Home Lenders (up $2.07 to $6.04, Charts), which slumped 65 percent on Tuesday.

Select financials bounced back too, including Dow components American Express (up $0.96 to $55.71, Charts), Citigroup (up $0.33 to $49.08, Charts) and JP Morgan (up $0.60 to $47.30, Charts).

A variety of homebuilders jumped too, including Lennar (up $1.35 to $45.18, Charts), Toll Brothers (up $0.99 to $28.33, Charts) and Centex (up $1.34 to $44.10, Charts).

But the broader concerns about housing and mortgages are expected to remain a drag on the market, particularly with more companies talking about the impact.

Dow component GM (down $0.26 to $30.25, Charts) swung to a profit that was nonetheless short of Wall Street estimates. The world's biggest automaker said that, while its North American operations recovered, the problems with subprime mortgage lending hit its finance unit.

Lehman Brothers reported higher quarterly earnings that topped estimates as strength in equity markets tempered any fallout from subprime. But Lehman (down $0.28 to $71.72, Charts) shares slid more than 5 percent through the early afternoon, before recovering most of the losses near the close.

Qualcomm (up $1.36 to $43.21, Charts) rose again one session after the wireless telecom provider boosted its second-quarter earnings and revenue outlook. On Wednesday, JPMorgan upgraded the stock, Briefing.com reported.

A variety of energy stocks bounced as well, including Exxon Mobil (up $1.11 to $71.02, Charts) and Valero Energy (up $1.08 to $61.27, Charts).

Market breadth was positive. On the New York Stock Exchange, advancers topped decliners 3 to 2 on volume of almost 2.07 billion shares. On the Nasdaq, winners beat losers 8 to 7 on volume of 2.29 billion shares.

Investors also eyed a morning report that showed that the fourth-quarter current account deficit narrowed more than expected.

U.S. light crude oil for April delivery rose 23 cents to settle at $58.16 a barrel on the New York Stock Exchange, seesawing after a mixed weekly oil inventories report.

COMEX gold for April delivery fell $6.90 to settle at $642.50 an ounce.

Treasury prices slipped, raising the yield on the 10-year note to 4.53 percent from 4.49 percent late Tuesday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar fell versus the euro and rose versus the yen.

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