Stocks fight back

NEW YORK (CNNMoney.com) -- Blue chips bounced and technology shares cut losses Wednesday afternoon, late in a choppy session influenced by disappointment about Intel's earnings and outlook.

The Dow Jones industrial average (INDU) added 0.4 percent with under an hour left in the session, while the broader S&P 500 (INX) index added 0.2 percent. The Nasdaq composite was little changed.

Stocks have gotten battered so far this year on worries that the credit crunch is sending the economy into a recession, if it isn't there already. Year-to-date, the Dow and S&P 500 had fallen around 6 percent as of Tuesday's close, while the Nasdaq had fallen 8.8 percent.

On Tuesday, Citigroup's big quarterly loss and weak Dec. retail sales amplified recession concerns, sending the Dow to a 9-month low and the S&P 500 and the Nasdaq to 10-month lows.

The broader worries remained in place Wednesday, but after such a big selloff in such a short period of time, investors were willing to scoop up select stocks. Wall Streeters were also perhaps relieved because the morning's inflation report, the Consumer Price Index (CPI), showed pricing pressure is contained.

"It gives the Fed even more freedom to move to keep us from falling into a recession, if we are not in one yet," said J. Stephen Lauck, CEO and portfolio manager at Ashfield Capital Partners.

Investors have been clamoring for the Fed to cut interest rates more aggressively at the next policy meeting that ends Jan. 30. Some on Wall Street are also calling for the central bank to step in ahead of the meeting to help stabilize markets.

A Citigroup report said the stock market is behaving as if a recession is unavoidable. If the threat of recession does become a reality, stocks probably have a lot further to fall, the report said.

Separately, the Merrill Lynch Global Fund Managers' survey for January shows that nearly 20 percent of respondents think a global recession is likely or very likely over the next 12 months.

Whether the economy really is in a recession - generally defined as two quarters in a row of declining GDP growth - or is just in a very sluggish period may not make much of a difference to the stock market.

"We're seeing a sharp stock correction that reflects that if we are not in a recession, we are close to it," Lauck said.

Additionally, many industries probably are in a recession now, even if the broad economy isn't, he said, including automakers, retailers, select financial sectors and housing.

The afternoon release of the Fed's "beige book" periodic reading on the economy showed that growth increased a bit during the survey period of mid-November through December, but at a slower pace than in the previous period.

JP Morgan (JPM, Fortune 500) reported weaker earnings that missed estimates amid a $1.3 billion writedown for bad mortgage debts. However, the financial leader also reported higher revenue that topped estimates.

JP Morgan shares gained around 7 percent and helped lead a bounce back in financials, one of the sectors hit hardest in the recent decline.

Fellow bank Wells Fargo (WFC, Fortune 500) reported weaker quarterly earnings due to a big subprime hit as well. However, the bank's earnings topped forecasts by a penny, sending shares higher.

The Amex Securities Broker/Dealer (XBD) index was down almost 10 percent year-to-date as of Tuesday's close. It bounced 2 percent Wednesday, with stocks such as Lehman Brothers (LEH, Fortune 500), Goldman Sachs (GS, Fortune 500) and Merrill Lynch (MER, Fortune 500) all gaining.

Also helping those stocks: news reports that Bear Stearns upgraded the financial sector to "market weight" from "underweight."

Home Depot (HD, Fortune 500) and Wal-Mart Stores (WMT, Fortune 500) led the list of retailers bouncing back. Biotech, health care and homebuilder stocks recovered a bit as well.

The broad tech sector stocks cut losses, but remained in the red.

Intel (INTC, Fortune 500) reported quarterly results and an outlook late Tuesday that disappointed investors. Intel shares slipped over 12 percent Wednesday.

Microsoft (MSFT, Fortune 500), Cisco Systems (CSCO, Fortune 500) and Yahoo! (YHOO, Fortune 500) were among the big technology shares dragging on the Nasdaq

One tech standout was BEA Systems (BEAS), which jumped 19 percent in active Nasdaq trade on reports that it has agreed to be bought by Oracle in an $8.5 billion all-cash deal. Oracle (ORCL, Fortune 500) stock gained 1 percent.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by nine to seven on volume of 1.56 billion shares. On the Nasdaq, advancers edged decliners four to three on volume of 2.8 billion shares.

In economic news, the December Consumer Price Index (CPI) rose 0.3 percent versus a year ago, while CPI at the core level - which strips out volatile food and energy - rose 0.2 percent. Economists surveyed by Briefing.com expected both CPI and core CPI to rise 0.2 percent.

Another report showed industrial production was flat in Dec., versus forecasts for a rise of 0.2 percent, while capacity utilization was 81.4 percent versus forecasts for 81.2 percent.

Additionally, the Joint Economic Committee is holding a hearing in Washington on what action the Federal Government should take to help avoid a recession.

Treasury prices slumped, raising the yield on the 10-year note to 3.70 percent from 3.68 percent late Tuesday. Treasury prices and yields move in opposite directions.

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

U.S. light crude oil for February delivery fell $1.65 to $90.25 a barrel on the New York Mercantile Exchange after the government's weekly inventory report showed a surprise jump in crude stocks.

COMEX gold for February delivery fell $18.90 to $883.70 an ounce.