Stocks try to shake housing woes

NEW YORK (CNNMoney.com) -- Upbeat earnings from Amazon.com and Boeing helped stocks bounce back Wednesday from the previous session's selloff, but gains were tempered by a disappointing reading on home sales.

The Dow Jones industrial average (up 56.09 to 13,773.04, Charts) rose about 0.4 percent about 2-1/2 hours into the session a day after the index of 30 blue chips tumbled 226 points, its third biggest point loss of the year, on worries about housing weakness and the nation's credit markets.

The broader S&P 500 (up 5.80 to 1,516.84, Charts) and the tech-laden Nasdaq (up 6.51 to 2,646.37, Charts) both gained more than 0.2 percent.

Upbeat results from Amazon.com helped send stocks higher at the open after the online retailer reported its quarterly profit more than tripled and raised its 2007 sales and operating earnings outlook. Amazon (up $17.04 to $86.29, Charts, Fortune 500) shares soared 24 percent in morning trade on the Nasdaq.

Investors weighed the June existing home sales report, which revealed that the pace of sales fell more than expected by 3.8 percent to a 5.75 million annual rate. Economists surveyed by Briefing.com had forecast that sales would slow to a 5.9 million pace.

"This is structural weakness that is going to remain a drag [on the economy] for some time," said Michael Strauss, chief economist at Commonfund, referring to the housing market.

"The question here is when is the Federal Reserve going to throw in the towel and recognize this is more than a limited subprime problem?" Some investors have been waiting for the Fed to start cutting interest rates, though most believe the central bank will sit tight for at least awhile. Lower rates tend to boost the economy and corporate profits, thus lifting stocks.

Worries about a prolonged housing slump and a new round of credit market jitters sent stocks tumbling Tuesday after Countrywide Financial (down $0.43 to $30.07, Charts, Fortune 500), the nation's largest mortgage lender, said it saw no upturn in housing until 2009, at the earliest, and reported a 33 percent drop in profits.

Famed bond fund manager Bill Gross added to credit market worries Tuesday after he warned that the recent woes in the subprime mortgage market were spilling over to junk bonds said that credit markets are facing a "sudden liquidity crisis."

Investors will also be closely eyeing the Fed's so-called Beige Book, which gives a look at economic conditions around the country, due out at 2 p.m.

In other earnings news, Dow component Boeing (up $3.33 to $107.13, Charts, Fortune 500) posted much better-than-expected earnings, lifting its shares 3 percent in morning trade on the New York Stock Exchange.

The third largest U.S. oil company ConocoPhillips (up $1.33 to $83.66, Charts, Fortune 500) reported lower results that were solidly better than expected when excluding charges related to its Venezuelan operations. Consumer products maker Colgate-Palmolive (up $1.33 to $69.58, Charts, Fortune 500) also posted earnings that topped estimates.

Shares of Corning (down $1.54 to $24.65, Charts, Fortune 500), the world's largest maker of fiber optic cable, tumbled 5 percent after the company reported lower quarterly profits, hurt by weaker-than-expected sales.

Apple (up $1.38 to $136.27, Charts, Fortune 500) is set to report after the market close. Its shares lost 6 percent Tuesday on concerns about a weaker than expected report on activations of the iPhone from AT&T (up $0.60 to $40.28, Charts, Fortune 500), which owns the cell phone service that uses the device.

On the corporate front, attempts by Cerberus Capital Management to tap debt markets for $20 billion needed for the purchase of its troubled Chrysler unit have run into trouble because of soft investor demand, the Wall Street Journal reported.

Treasury prices were little changed, leaving the yield on the 10-year note at 4.91 percent late Tuesday. Bond prices and yields move in opposite directions.

The dollar gained against the euro and the yen. COMEX gold for August fell $12 to $672.80.

Oil prices retreated from session highs after the weekly U.S. fuel inventory report revealed a stronger-than-expected increase in inventories. U.S. light crude rose 33 cents to $73.89 a barrel on the New York Mercantile Exchange.

Overseas, major Asian stocks finished the session lower, and European markets were mixed.