Stocks stage recovery

Quick Vote

What do you think of the rate decision by Federal Reserve policy makers?

• It's the right move
• They should have cut rates more
• They should not have cut rates
• Not sure

or View results

NEW YORK (CNNMoney.com) -- Stocks staged a late-session recovery Thursday, ending mixed after a tough session driven by worries about the economy after a report showed a big jump in wholesale prices.

On the upside, a strong reading on retail sales cooled some concern about consumer spending.

The Dow Jones industrial average (INDU) added 0.3 percent, while the broader S&P 500 (SPX.X) index ended just above unchanged. The tech-fueled Nasdaq (COMPX) composite lost a few points.

The major gauges had posted big declines through the early afternoon, but managed to stabilize near the close as some of the selling pressure on financials and commodities eased.

"We're still in a period of heightened skittishness, a lot of which goes back to the subprime crisis," said Matt King, chief investment officer at Bell Investment Advisors. "Until the market can wrap its arms around that issue, we're going to keep seeing this volatility."

Stocks have been volatile all fall as investors have sorted through the ongoing problems in the housing and credit markets amid worries about a possible recession. In particular, the developments in the credit markets have left investors scratching their heads.

"We're seeing enormous fluctuations here, because this is a new type of problem and people don't really understand how it works or how long it's going to go on," said Robert Loest, portfolio manager at Integrity Funds.

"We're going to get a resolution, but no one knows when and that's part of the stock market's problem right now," he added.

Friday brings reading on consumer prices, industrial production and capacity utilization.

News from the Fed this week provided some reassurance, but concerns remain front and center.

On Wednesday, the Federal Reserve announced a plan to team up with other central banks to help banks borrow money more easily, a plan investors continued to mull Thursday.

Earlier this week, the Federal Reserve cut a key short-term interest rate by a quarter-percentage point, saying that the economic outlook was worsening. The bankers also alluded to still-present inflationary pressures.

Questions of inflationary pressures were raised again by Thursday's economic news, including reads on producer prices and retail sales.

The Producer Price Index (PPI) jumped 3.2 percent in November, due in large part to a spike in energy prices, the government reported. PPI was well above forecasts and followed a rise of 0.1 percent in October. So-called "core" PPI, which excludes food and energy prices, also rose more than expected. (Full story).

A separate report showed a stronger-than-expected jump in November retail sales and in sales excluding autos.

Another report showed a bigger drop in weekly jobless claims than economists were expecting. Meanwhile, business inventories rose 0.1 percent in October, shy of forecasts.

In corporate news, Lehman Brothers (LEH, Fortune 500) reported a decline in quarterly profit that nonetheless topped estimates. Shares fell through most of the session on the news, along with other big bank stocks. But the selling pressure eased up by the close.

Merrill Lynch (MER, Fortune 500), JP Morgan Chase (JPM, Fortune 500) and Citigroup (C, Fortune 500) all ended the session with modest losses .

Washington Mutual (WM, Fortune 500) dipped after Banc of America Securities downgraded it to "sell" from "hold," Briefing.com reported.

Fellow mortgage lender Countrywide Financial (CFC, Fortune 500) slipped as well.

JetBlue Airways (JBLU) surged over 14 percent on news that German carrier Deutsche Lufthansa will buy a roughly 19 percent stake in the discount air carrier for $7.27 per share, confirming earlier rumors.

Dow component Honeywell (HON, Fortune 500) jumped 5 percent after forecasting 2008 earnings-per-share growth that is above expectations.

Shares of Biogen Idec (BIIB) lost 24 percent after the company said it had failed to find a buyer and would remain independent.

Biotech Savient Pharmaceuticals (SVNT) jumped 18 percent in active Nasdaq trade after its gout drug candidate showed positive results in a late-stage trial.

Another biotech, Rigel Pharmaceuticals (RIGL), also gained on positive study results for a rheumatoid arthritis drug candidate. The company's stock surged 224 percent in afternoon trading.

In corporate deal news, Dow Chemical (DOW, Fortune 500) said it will sell a 50 percent stake in five of its businesses to a Kuwaiti company for $9.5 billion. Shares jumped 6.

A variety of oil and gold stocks fell in tandem with the prices of the raw commodities. The Amex Gold Bugs (HUI) index lost 2.7 percent.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by two to one on volume of 1.46 billion shares. On the Nasdaq, decliners topped advancers by three to one on volume of 2.15 billion shares.

Treasury prices slipped, raising the yield on the 10-year note to 4.20 percent from 4.09 percent late Wednesday. Treasury prices and yields move in opposite directions.

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

U.S. light crude oil for January delivery fell $2.09 to settle at $92.30 a barrel on the New York Mercantile Exchange.

COMEX gold for February delivery fell $14.80 to settle at $804 an ounce.