Stocks manage a modest gain
Investors work through Lehman's announcement of a steep quarterly loss, getting a boost from some upbeat earnings forecasts and the dollar's advance.
NEW YORK (CNNMoney.com) -- Stocks ended higher Wednesday as investors scooped up shares battered in the previous session's selloff and sorted through Lehman Brothers' steep quarterly loss and restructuring plans.
Strong earnings forecasts from FedEx and Texas Instruments, a firmer dollar, and lower oil and gold prices lent additional support. But continued worries about the financial sector limited gains for the blue chips.
The Dow Jones industrial average (INDU) gained 0.3%. The Nasdaq composite (COMP) rose 0.9% and the Standard & Poor's 500 (SPX) index advanced 0.6%.
Stocks slumped Tuesday, with the Dow sinking 280 points, as speculation about Lehman's ability to raise capital and AIG's mortgage-related losses sparked worries about another Bear Stearns - the bank that the government had to rescue in March.
Lehman sought to manage those fears Wednesday, announcing its third-quarter results early and addressing the liquidity issues.
The news seemed to give a boost to a variety of stocks, with investors finding some reassurance in the announcement. However, the stock market was also being lifted by technical factors, with investors scooping up recently beaten-down shares, said Robert Loest, portfolio manager at Integrity Funds.
The news coming out of Lehman was "better than nothing, but not enough," Loest said.
"You have institutions like Lehman announcing a writedown or a restructuring and people think they're getting a handle on the balance sheet, but they're not," he said. "These solutions are near-term pieces of hope that aren't going to solve long-term problems."
Lehman Brothers: Lehman reported a nearly $4 billion fiscal third-quarter loss, its biggest quarterly loss since it went public in 1994. The company also said it will spin off part of its commercial real estate assets and slash its dividend. Additionally, Lehman plans to sell a 55% stake in its investment management division, which includes profitable money manager Neuberger Berman.
Wall Street had been betting on Lehman selling all or part of the investment division for weeks. However, investors became nervous Tuesday when reports said Lehman's talks with the state-run Korea Development Bank had dried up, with no partnership announced. That sent Lehman shares down 45%.
Lehman calmed some of those fears Wednesday when it said it was in advanced talks with a number of potential partners.
"I think there's relief that they are at least addressing the issues and that there are potential buyers out there," said Joe Arnold, wealth manager at Dawson Wealth Management.
Lehman (LEH, Fortune 500) shares were choppy on the news, ending lower after rising nearly 10% in the morning and almost 30% in pre-market trading.
But other firms that made bad mortgage bets and are potentially in need of capital saw their shares pummeled. They included Washington Mutual (WM, Fortune 500) and Wachovia (WB, Fortune 500). (Full story)
In addition, Arnold said stock investors were continuing to respond to the government bailout of troubled mortgage giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), announced Sunday.
"You look at the buyout of Fannie and Freddie and that has actually sent mortgage rates lower already, which is positive," he said.
(However, the lower rates don't necessarily make getting a loan any easier.)
On the downside, regional banks and insurers continued to struggle in the wake of the government takeover of the two mortgage giants.
Company news. FedEx (FDX, Fortune 500) offered some encouraging news late Tuesday, saying it expects higher fiscal first-quarter earnings of $1.23 per share versus current expectations for a profit of 95 cents, largely because of lower commodity costs. FexEx is often seen as a proxy for the economy. Shares gained 3.7% Wednesday.
Texas Instruments (TXN, Fortune 500) shares inched higher after the chipmaker narrowed its earnings and sales forecast to a range that meets or beats analysts' forecasts. The announcement was part of its scheduled mid-quarter update late Tuesday.
Research in Motion (RIMM) shares jumped after it introduced a flip phone version of its popular Blackberry Pearl phone.
The Pentagon said it's delaying its decision on a $35 billion Air Force refueling tanker contest until the next administration takes office. Northrop Grumman was initially awarded the deal, which Boeing contested as unfair. The government agreed, initially reopening bidding, before deciding to end the current contest and have the decision made by the next administration.
Northrop (NOC, Fortune 500) and Boeing (BA, Fortune 500) shares both declined. (Full story)
In other news, ImClone (IMCL) said it has received a $70-per-share buyout offer from a large pharmaceutical company, topping an earlier offer of $60 per share from Bristol-Myers Squibb (BMY, Fortune 500). Bristol already owns a 20% share in the company. ImClone stock gained 6.7%.
Among other movers, a variety of airlines, railroads and truckers bounced on the lower oil prices, lifting the Dow Jones Transportation (DJTA) average up by 2.5%.
Market breadth was positive. On the New York Stock Exchange, winners beat losers on volume of 1.55 billion shares. On the Nasdaq, advancers topped decliners four to three on volume of 2.32 billion shares.
Fuel prices: Oil prices as the government indicated weaker demand for gasoline, even as supplies of crude and gas dipped more than expected last week.
U.S. light crude oil for October delivery fell 68 cents to settle at $102.58 a barrel on the New York Mercantile Exchange, the lowest close since April 1.
Gas prices rose overnight, breaking a nine-day losing streak, according to a national survey of credit-card activity.
Other markets: In global trade, European and Asian markets ended lower.
In the bond market, Treasury prices tumbled, raising the yield on the benchmark 10-year note to 3.63% from 3.57% late Tuesday. Prices and yields move in opposite directions.
The dollar rallied versus the euro and yen.
COMEX gold for December delivery fell $29.50 to $762.50 an ounce. 
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