Wall Street can't find its way

NEW YORK (CNNMoney.com) -- Stocks rebounded from early session lows and turned mixed Thursday as nervous investors watched Treasury bond yields, higher oil prices and awaited a key regional manufacturing reading.

Investors were also watching developments at Bear Stearns, the Wall Street firm struggling to rescue two hedge funds hit by big losses in troubled securities backed by subprime mortgages.

The Dow Jones industrial average (down 23.81 to 13,465.61, Charts) was little changed about two hours into the session after falling nearly 0.7 percent earlier. The broader S&P 500 (down 0.18 to 1,512.66, Charts) and the tech-laden Nasdaq (down 0.45 to 2,599.51, Charts) both rose about 0.1 percent.

"The topics of the day seem to be gas prices, Bear Stearns and the threat of a selloff or auctioning of mortgage-backed securities and the impact it could have on hedge funds," said Greg Estes, a portfolio manager with Intrepid Capital Funds.

Rising Treasury yields, which helped send the Dow tumbling 146 points Wednesday, stabilized Thursday. The yield on the benchmark 10-year note stood at about 5.14 percent, little changed from the previous session. Bond prices and yields move in opposite directions.

Wednesday's announcement by Merrill Lynch (Charts) that it seized about $800 million of assets from two Bear Stearns (up $0.42 to $143.62, Charts, Fortune 500) hedge funds, which are heavily invested in securities backed by subprime mortgages, added to worries in the already rattled bond market.

Market observers have speculated that the two funds are on the verge of collapse and similar problems could erupt elsewhere. There has also been speculation the situation could lead to a tightening of credit and ultimately disrupt the bond market.

Oil prices jumped in early trading, as U.S. light crude for August gained 49 cents to $69.35 a barrel in NYMEX trading.

In economic news, The Conference Board reported its leading indicators index, an indicator about the future performance of the economy, rose 0.3 percent in May, about in line with estimates, after falling in April.

Investors were also awaiting the Philadelphia Federal Reserve's manufacturing survey due out at noon ET.

Weekly jobless claims jumped to their highest level in nearly two months as first-time unemployment claims rose to 324,000 for the week ended June 16, the Labor Department reported.

On the earnings front, home furnishing retailer Pier 1 (down $0.36 to $8.27, Charts) reported its quarterly losses more than doubled due to weak sales and said it planned to close more stores than initially expected. Shares sank 2.4 percent in morning trade.

Shares of H&R Block (down $0.88 to $21.90, Charts, Fortune 500) skidded 4 percent after the tax preparer reported lower profits in the fourth-quarter, falling short of Wall Street forecasts, blaming weakness in its mortgage unit.

In corporate news, Starbucks (down $0.83 to $26.49, Charts, Fortune 500) shares fell nearly 3 percent Thursday after the chief financial officer of the coffee house chain warned that its 2007 earnings forecast would be difficult, blaming such market conditions as higher dairy costs.

Shares of U.S. sunglasses maker Oakley (up $3.26 to $28.49, Charts) soared nearly 13 percent after leading eyewear maker Luxottica Group (up $2.94 to $37.78, Charts) agreed to buy the company for $2.1 billion in cash.

Dow Jones (down $0.10 to $60.55, Charts) announced late Wednesday its board of directors is taking over negotiations from the Bancroft family that controls most of its voting shares regarding News Corp.'s (Charts, Fortune 500) $5 billion offer to buy the company. Dow Jones shares fell nearly 1 percent.

Dow component Pfizer (up $0.10 to $25.81, Charts, Fortune 500) said late Wednesday that U.S. health regulators will approve its novel AIDS drug called Maraviroc once certain conditions have been met after the FDA failed to give full approval to the treatment. Pfizer stock edged lower in morning trade.

Overseas, the London Stock Exchange said it is in merger talks with Borsa Italiana, a move viewed as a response to NYSE Euronext's growing global expansion.

Market breadth was negative. On the New York Stock Exchange, losers barely beat winners on volume of 590 million shares. On the Nasdaq, decliners also topped advancers by the same ratio on volume of 774 million shares.

Foreign markets were mixed. European markets fell, while stocks in Asia climbed, maintaining their record-setting run.

The dollar moved slightly higher against both the euro and the yen.

COMEX gold for August delivery fell $2 to $658 an ounce.