Dow gains, Nasdaq wanes
Tech indicator slides again on recession fears, but blue chips manage gains.
NEW YORK (CNNMoney.com) -- Stocks were mixed Thursday, with the Dow rallying back after two days of declines, and the Nasdaq slipping to its lowest point in more than five years.
The Dow Jones industrial average (INDU) gained 2% or 172 points, erasing a loss of as much as 275 points. The Standard & Poor's 500 (SPX) index gained 1.3%.
But the Nasdaq composite (COMP) lost 0.7%, recovering a little after touching a new bear-market low around 1,533 during the session.
After the close, Microsoft (MSFT, Fortune 500) reported quarterly sales and earnings that topped forecasts. But the software leader also warned that sales and earnings for the fiscal second-quarter and the full year won't meet forecasts due to the slowing economy. (Full story)
Stocks slumped Wednesday, with the Dow falling more than 500 points as dropping oil prices and worries about earnings exacerbated fears of a global recession. Both the S&P 500 and the Nasdaq ended at more than five-year lows.
Stocks gained in the morning on some of the commentary out of the House hearing on the credit crisis. But the advance was short-lived, and stocks zigzagged through the rest of the session.
Wednesday's session continued the trend of extreme volatility that Wall Street has dealt with for more than a year, said Ted Weisberg, NYSE floor trader at Seaport Securities.
The huge swings "are in some ways breathtaking and in other ways, becoming routine," he said. "I think it's very disconcerting for most investors."
Some of the stocks that were hit in Wednesday's selloff bounced back Thursday, including Dow components Chevron (CVX, Fortune 500), Exxon Mobil (XOM, Fortune 500) and Boeing (BA, Fortune 500).
Economically sensitive stocks - including Alcoa (AA, Fortune 500), Caterpillar (CAT, Fortune 500) and Home Depot (HD, Fortune 500) - were among the Dow's biggest losers.
Bank stocks were mostly lower. Financial firms have borrowed a record of $105.8 billion a day from the Federal Reserve's emergency lending window over the past week.
"There is some good news out there, with the credit market functioning a bit more efficiently," Weisberg said. "But unfortunately the market is in a phase where everything is seen as negative."
Economy: Markets initially rallied after FDIC chairwoman Sheila Bair told a Senate committee that a new plan is on tap to help homeowners avoid foreclosure, if possible.
Her comments came after a new indication of weakness in the housing market, with 81,312 homes lost to foreclosure in September, according to a report released Thursday.
Former Federal Reserve Chairman Alan Greenspan told a House committee that "we are in the midst of a once-in-a-century credit tsunami," but that the nation will emerge from it with a sounder financial system. (Full story)
Job cuts: The number of Americans filing new claims for unemployment last week jumped 15,000 to 478,000, topping forecasts for a smaller rise to 465,000.
Meanwhile, General Motors (GM, Fortune 500) hinted that it would need to announce more job cuts as part of a broad and ongoing restructuring program aimed at cutting costs. (Full story)
Goldman Sachs (GS, Fortune 500) will cut about 3,260 jobs or roughly 10% of its work force, due to rough financial market conditions, according to sources. (Full story).
Xerox (XRX, Fortune 500) will cut 3,000 jobs worldwide as part of its restructuring plan, the company said Thursday.
Results: About 34% of S&P 500 companies have already reported results and third-quarter profits are currently on track to have fallen almost 10.9% from a year earlier, according to the latest estimates from Thomson Reuters.
At the same time, forecasts have been weak or non-existent, with corporate America scrambling to give guidance amid a slowing economy.
Late Wednesday, Amazon.com (AMZN, Fortune 500) reported higher quarterly earnings that topped estimates, on higher sales that missed estimates. But it warned that 2008 revenue won't meet forecasts because the critical fourth quarter isn't shaping up as well as had been forecast.
Amazon shares ended little changed Thursday, erasing losses by the close.
Level 3 Communications (LVLT) slumped 39% in unusually active Nasdaq trade. The maker of fiber-optic networks reported a narrower-than-expected quarterly loss, but issued a fourth-quarter revenue forecast that disappointed some investors.
Stocks have tumbled over the last year as the financial market meltdown and economic contraction have weighed on equities. Since hitting an all-time high of 14,164 just over a year ago, the Dow has lost about 38%. Since hitting an all-time high of 1,565 at the same time, the S&P 500 has lost around 41%.
Since hitting a bull-market high of 2,859 nearly a year ago, the Nasdaq has crumbled 44%.
Fuel prices: U.S. light crude oil for December delivery rose $1.09 to $67.84 a barrel on the New York Mercantile Exchange after ending the previous session at a 16-month low.
Oil prices have been dropping since crude peaked at an all-time high of $147.27 a barrel on July 11. The decline has occurred as speculators have pulled back and investors have bet that demand for oil will slow.
Gasoline prices fell another 3.6 cents overnight, to a national average of $2.822 a gallon, according to a survey of credit-card activity by motorist group AAA. It was the 36th consecutive day that prices have decreased. During that time, prices have fallen by over $1 a gallon.
Credit market: Lending rates showed little movement Thursday, after improving over the last week or so. (Full story)
Libor, the overnight bank-to-bank lending rate, rose slightly to 1.21% from 1.12% Wednesday, according to Bloomberg.com. However, that still kept the rate below the Fed's benchmark lending rate of 1.5%, which is a good sign for the credit market. Libor hit a record 6.88% earlier this month at the height of the market panic.
The 3-month Libor rate, what banks charge each other to borrow for three months, held steady at 3.54%, unchanged from Wednesday.
The TED spread, which is the difference between what banks pay to borrow from each other for three months and what the Treasury pays, widened modestly to 2.56% from 2.55% late Wednesday. The spread hit a record 4.65% earlier this month. The narrower the spread, the more willing banks are to lend to each other.
Lending rates have been improving over the last week - a trend that needs to continue in order for financial markets to stabilize.
Credit froze up in the wake of the housing market collapse, subprime fallout and contraction in the bank sector. The lack of available credit has punished the already weak economy, making it hard for businesses to function on a daily basis and for consumers to get loans.
Treasury prices rose, lowering the yield on the 10-year note to 3.54% from 3.59% Thursday. Treasury prices and yields move in opposite directions.
The yield on the 3-month Treasury bill, seen as the safest place to put money in the short term, slipped to 0.98% from 1.01% late Wednesday. However, the yield remained above recent lows as investors began to pull money out of the safer investment and put it back in stocks.
Last week, the 3-month fell to below 0.2%. Last month, it reached a 68-year low around 0% as investor panic hit its peak.
Other markets: COMEX gold for December delivery fell $20.50 to settle at $714.70 an ounce.
In currency trading, the dollar rose against the euro and fell against the yen. 
