Stocks muster gains

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NEW YORK (CNNMoney.com) -- Stocks gained Tuesday at the end of a rocky session that saw strong earnings from Goldman Sachs offset by concerns about how the credit market crisis will impact the economy.

The Dow Jones industrial average (INDU) added 0.5 percent. The broader S&P 500 (INX) index added 0.6 percent. The tech-fueled Nasdaq (COMPX) composite gained 0.8 percent. The Russell 2000 (RUT.X) small-cap index added 2 percent.

Treasury prices were mixed. The dollar was lower against the euro but gained against the yen. Oil prices slipped and gold prices rose.

Stocks had risen through the mid morning thanks to earnings from Goldman Sachs and Best Buy and news that the European Central Bank made billions available to keep the banking system liquid.

But gains wavered throughout the afternoon, as some of the broader economic worries of recent weeks returned. Afternoon buying in technology and commodities gave the markets a leg up near the close.

After the close, Palm (PALM) reported a quarterly loss versus a profit a year ago and warned that it expects to post a loss of 14 cents to 16 cents in the current quarter, steeper than what analysts are expecting. Shares slumped 11 percent in after-hours trading.

Wednesday brings earnings from Morgan Stanley, the Mortgage Bankers' Association's latest mortgage purchases news and comments from Richmond Federal Reserve President Jeffrey Lacker.

Goldman Sachs (GS, Fortune 500) reported higher quarterly sales and earnings that topped estimates, delivering solid results despite the current credit market crisis. Nonetheless, shares fell, as investors took a 'sell the news' reaction. In addition, investors may have been reacting to signs of a slowdown in several divisions.

Goldman's earnings alone weren't enough to calm investors at the start of a big wave of bank sector earnings reports, noted Phil Dow, director of equity strategy at RBC Dain Rauscher.

"Goldman is a preeminent risk manager, and you've got to applaud that," Dow said. "But the market is concerned right now with the overall financial group and how they report earnings through the start of January," he said.

Morgan Stanley (MS, Fortune 500) is due to report results Wednesday and Bear Stearns (BSC, Fortune 500) on Thursday, with more companies to follow in the weeks ahead.

Best Buy (BBY, Fortune 500) reported higher quarterly sales and earnings that topped forecasts, thanks to extra shopping days in November and more store openings. However, the electronics retailer cautioned that December and fourth-quarter sales will be constrained. Shares slipped during the session but rallied near the close.

Adobe Systems (ADBE) reported higher quarterly sales and earnings that topped estimates and said that it plans to buy another 30 million shares next year in addition to the 20 million it already announced.

A number of other big technology shares also rose, helping the Nasdaq, including Intel (INTC, Fortune 500), Oracle (ORCL, Fortune 500) and Dell (DELL, Fortune 500).

A variety of gold and silver stocks gained as well, with the stocks responding to a rise in the underlying commodity prices.

Market breadth was positive. On the New York Stock Exchange, winners beat losers three to two on volume of 1.49 billion shares. On the Nasdaq, advancers topped decliners three to two on volume of 2.01 billion shares.

In other news: the ECB said it has made available unlimited funds at a set rate for the next two weeks, in a move to help with liquidity demands through the end of the year. The move follows an announcement last week that the ECB, the U.S. Federal Reserve and other banks have teamed up to make billions available for banks seeking loans.

Meanwhile, housing construction and building permits dropped in November, according to a government report released Tuesday. The decline was smaller than what economists had forecast, but nonetheless showed a continued deterioration in the market. (Full story)

Elsewhere on the housing front, the Federal Reserve proposed a much stricter set of rules for mortgage lenders as part of the central bank's effort to combat shady lending practices.

Stocks had slumped Monday and the previous week on worries about the economic outlook amid rising inflationary pressures and slower growth prospects.

Treasury prices fell slightly, lowering the yield on the 10-year note to 4.12 percent from 4.14 percent late Monday. Treasury prices and yields move in opposite directions.

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

U.S. light crude oil for January delivery fell 14 cents to settle at $90.49 a barrel on the New York Mercantile Exchange.

COMEX gold for February delivery rose $8.10 to settle at $807.40 an ounce.