Stocks climb back

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NEW YORK (CNNMoney.com) -- Stocks struggled higher Tuesday afternoon, as investors scooped up recently battered shares, but gains were limited by spiking oil and gas prices, more housing market woes and dour comments on the economic outlook from government officials.

The Dow Jones industrial average (INDU) added a few points with 90 minutes left in the session. The broader S&P 500 (INX) index and the Nasdaq (COMPX) composite both added 0.6 percent.

Stocks rose Tuesday morning as investors welcomed news of executive changes at Bear Stearns and Starbucks. But the market turned volatile as the session wore on amid more bad news and forecasts on the housing market.

Meanwhile, oil prices jumped back above $97 a barrel and gold prices flirted with record highs. These events had a mixed impact on trading, raising worries about inflationary pressures, but also boosting a variety of energy and commodity stocks, and giving the market a floor to bounce off.

The housing and mortgage markets were again front and center.

The National Association of Realtors said that contracts to sell existing homes fell in November by a steeper-than-expected margin. The group also pushed back its forecast for a price rebound to 2009.

Treasury Secretary Henry Paulson said in a speech that housing market problems are not easing, Briefing.com reported. Meanwhile, Boston Fed president Eric Rosengren said that if forecasts pan out, the United States will see the longest housing investment decline in 50 years.

And builder KB Home (KBH, Fortune 500) reported a steeper-than-expected quarterly loss, all of which sent homebuilding stocks lower.

Rumors that Countrywide Financial (CFC, Fortune 500) could file for bankruptcy in the near term sent that stock and other mortgage bankers lower. Countrywide denied the rumors in the afternoon, but the stock remained under pressure. Also a factor: a New York Times article that said that the company had fabricated letters claiming a borrower under bankruptcy protection owed the company money.

With worries that the economy could be heading into recession, Wall Streeters have been looking to the Federal Reserve to cut short-term interest rates by as much as a half-percentage point at the next policy meeting at the end of January.

Philadelphia Fed President Charles Plosser, speaking Tuesday morning, said that policy decisions are getting harder to make because inflationary pressures are rising and slow economic growth is no longer sufficient to take the edge off pricing pressures. However, he said he wouldn't be opposed to more cuts.

Plosser will be a voting member of the Fed's 2008 policy-setting committee, starting with the January meeting.

In corporate news, Bear Stearns (BSC, Fortune 500) confirmed that its chief executive is stepping down amid the investment bank's big subprime losses, to be replaced by the bank's current president. Shares slumped after rising in the morning on the rumors of the executive shuffle.

Starbucks (SBUX, Fortune 500) said late Monday that it was replacing its CEO with its chairman and former chief executive, as well as closing under-performing stores. Shares rallied Tuesday.

The Starbucks news followed Monday's announcement that McDonald's (MCD, Fortune 500) will unveil its own coffee bars, complete with baristas, at its nearly 14,000 U.S. locations, taking on Starbucks' dominance in the area.

Market breadth was mixed. On the New York Stock Exchange, winners beat losers by a narrow margin on volume of 1.01 billion shares. On the Nasdaq, decliners narrowly edged advancers on volume of 1.55 billion shares.

Treasury prices slipped, raising the yield on the 10-year note to 3.86 percent from 3.83 percent late Monday. Treasury prices and yields move in opposite directions.

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

U.S. light crude oil for February delivery rose $1.76 to $96.85 a barrel on the New York Mercantile Exchange Tuesday.

COMEX gold for February delivery rallied $18.20 to $880.20 an ounce.

As of Monday's close, the S&P 500 and Dow industrials were both down more than 3 percent for the year and the Nasdaq was down nearly 6 percent for the year, reflecting the ongoing worries that the economy could be heading into a recession.

Barring a stupendous afternoon rally Tuesday, stocks are set to end the first five sessions of the year with declines, a bad start to what the Stock Trader's Almanac calls an "early warning sign" for stocks. According to the Almanac, what the S&P 500 does in the first five trading days of the year can correlate with what it does in the full year.

Yet the stat is most accurate when the first five days of the year are positive. When that happens, full-year gains follow 86.1 percent of the time, the Almanac said, looking at results stretching back to 1950. When the first five days are negative, full-year declines followed less than 50 percent of the time.