Stocks in zigzag
Encouraging news on jobs and inflation countered by big losses from Citi and Merrill.
NEW YORK (CNNMoney.com) -- Stocks seesawed early Thursday, one day after a massive selloff sent the Dow Jones industrial average to its second biggest one-day point loss.
The Dow Jones industrial average (INDU) and the Standard & Poor's 500 (SPX) index both gained around 0.7%. The Nasdaq composite (COMP) added 0.6%.
All three gauges started higher, turned lower, and went back up again - all within the first 8 minutes.
Investors were weighing Merrill Lynch and Citigroup's mixed quarterly results with better-than-expected readings on inflation and the labor market.
Stocks got hammered Wednesday as recessionary fears grew following a much weaker-than-expected retail sales report, a dismal outlook from the Federal Reserve and sobering comments from Fed chair Ben Bernanke.
"We're seeing a bounceback after a major selloff," said Peter Cardillo, chief market economist at Avalon Partners. "But there has been a lot of market turmoil recently, so we'll have to wait and see - there are a lot of worries about the economy."
While the credit markets have been signaling some modest easing this week, there are still high levels of risk aversion underpinning the markets.
Investors are hoping for any signs of good news on both the corporate and economic front and Thursday brings a slew of reports for them to chew on.
Eyes on economy. According to the latest latest reading on new unemployment filings, jobless claims fell by 16,000 to 461,000, a much greater decline than the 8,000 that a consensus of analysts surveyed by Briefing.com expected.
But in another sign that the job market recovery has a ways to go, the number of people collecting benefits for more than a week surged to 3.71 million- its highest level since Feb. 21, 2004.
Also, the Bureau of Labor Statistics said that the latest inflation measure was unchanged in September. Economists expected the Consumer Price Index to show a modest 0.1% increase for September. The core CPI, which excludes the volatile food and energy prices, rose just 0.1%. Economists expected that measure to come in at an increase of 0.2%.
Company news. Dozens of companies are reporting their quarterly financial reports Thursday morning, namely embattled bank Citigroup (C, Fortune 500) and investment bank Merrill Lynch (MER, Fortune 500).
Merrill Lynch reported results shortly after 6:30 a.m. ET, saying its third-quarter loss was worse than expected, largely due to $8.5 billion in writedowns related to bad mortgage debt.
Citi posted a smaller-than-expected quarterly loss at 7:00 a.m. ET, though the bank said its revenue was lower than analysts' predictions. The loss was partially due to about $12 billion in writedowns related to credit and loan losses.
"This market has already discounted bad earnings," Cardillo said. "Everyone knew earnings wouldn't be good."
Citigroup and Merrill Lynch, which is in the process of being purchased by Bank of America (BAC, Fortune 500), have racked up billions in losses over the past three quarters and were both widely expected to extend their losing streaks.
Oil and dollar. Oil prices continue to be pressured lower amid heightened anxiety over a global slowdown in demand. Prices fell below $80 a barrel Thursday, trading down 19 cents to $74.35 a barrel.
Prices have lost nearly $75, or more than 51%, since peaking at $147.27 a barrel on July 11.
At 11:00 a.m. ET, the Energy Information Administration will issue its weekly reading on crude and gasoline inventories, which was delayed a day this week due to the federal holiday Monday.
According to Platts, the energy research arm of McGraw Hill Cos., oil supplies are expected to show an increase of 3.1 million barrels, while gasoline inventories are forecast to be up 3.1 million barrels.
Meanwhile, the dollar has been on a volatile ride of late, reacting to U.S. and overseas government interventions aimed at propping up global and domestic economies. Early Thursday, the greenback was higher against the yen, but remained lower versus the British pound and the 15-nation euro. 
