Stocks fight their way back

NEW YORK (CNNMoney.com) -- Blue-chips stocks rose for the fifth time in six sessions Thursday as merger news and strength in the financial sector overshadowed concerns about subprime mortgages.

The Dow Jones industrial average (up 26.28 to 12,159.68, Charts) added about 0.2 percent and has now risen each session since March 7 save for Tuesday, when the index of 30 blue chips tumbled 242 points on worries about the mortgage market and the economy - the market's second worst day this year.

The broader S&P 500 (up 5.11 to 1,392.28, Charts) index rose nearly 0.4 percent, while the tech-heavy Nasdaq (up 6.96 to 2,378.70, Charts) composite added 0.3 percent.

Stocks zigzagged early Thursday after the Producer Price Index (PPI), a gauge of inflation at the wholesale level, showed a surprising jump. The report was a cause for concern for investors ahead of next week's Federal Reserve policy meeting on interest rates. But another inflation number due Friday, the Consumer Price Index, is more closely watched by the central bank, which is expected to hold rates steady at next week's meeting.

Also taking a toll on stocks were concerns by former Fed Chairman Alan Greenspan that the problems with subprime mortgages could spill over to other sectors.

Over the past few weeks, investors have been worried that 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.

But all three major gauges turned higher by late afternoon, as falling oil prices eased some inflationary concerns. Crude prices have fallen from over $62, or 7 percent, in the last five sessions.

Art Hogan, chief market strategist at Jefferies & Co., called the pullback in energy prices on the heels of the PPI report "a very good sign."

Investors could be in for another volatile session on Friday thanks to the quadruple options expiration, a quarterly event when stock index futures and options and individual stock futures and options all expire at the same time.

Hogan said that the market's choppiness is likely to continue at least until the Fed meets next week.

"We'll have to see what kind of commentary we get out of the statement," Hogan said. "That will be a big driver of the markets next week."

In merger news, Cisco Systems (down $0.04 to $25.81, Charts) said it was buying WebEx (up $10.18 to $56.38, Charts), which makes online collaborative software, for about $3.2 billion. WebEx shares jumped 22 percent.

Additionally, InternationalExchange (down $3.83 to $128.10, Charts) made a surprise $9.9 billion bid for CBOT Holdings (Charts), although the options market operator is already in the late stages of combining with the Chicago Mercantile Exchange (down $31.09 to $532.88, Charts).

And CVS (up $1.03 to $33.34, Charts) shareholders voted to approve a $26.5 billion takeover bid for Caremark Rx Inc. (up $1.67 to $62.75, Charts)

Among individual stocks, Bear Stearns (up $3.21 to $148.50, Charts) reported higher quarterly earnings Thursday and said that the fallout in the subprime mortgage industry had only a limited impact on its financial performance.

Competitor Lehman Brothers (up $1.31 to $73.03, Charts) reported strong results Wednesday and also downplayed the impact from subprime.

Other banking stocks, including Goldman Sachs (Charts) and Merrill Lynch (Charts), were also higher.

Dow component General Motors (down $0.87 to $29.38, Charts) warned about accounting problems, saying that its internal controls over financial reporting are ineffective and could make it hard for the company to execute its business plan.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by nearly 3 to 1 on volume of 1.5 billion shares. On the Nasdaq, advancers topped decliners by 3 to 2 on volume of 1.7 billion shares.

The Producer Price Index (PPI), released early Thursday, jumped 1.3 percent in February after falling 0.6 percent in January. The so-called core PPI, stripping out often volatile food and energy, rose 0.4 percent after rising 0.2 percent in January. Both overall and core PPI were well above forecasts.

A separate report early Thursday showed a big drop in manufacturing in the New York region. The NY Empire State Manufacturing index fell to 1.9 in March from 24.4 in February, versus forecasts for a drop to 17.0.

A report on manufacturing in the Philadelphia region, released around noon, also showed surprising weakness. The Philadelphia Fed index fell to 0.2 from 0.6 in February. Economists thought it would rise to 3.5. Anything above zero indicates expansion.

U.S. light crude oil for April delivery fell 61 cents to $57.55 a barrel on the New York Mercantile Exchange.

Treasury prices were little changed, with the yield on the 10-year note holding at about 4.53 percent, similar to its rate late Wednesday.

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

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