NEW YORK (CNNMoney.com) -- U.S. stocks recovered from deep losses Wednesday and finished a choppy session near the previous day's closing levels as investors considered mixed economic news and BP's agreement to establish a $20 billion escrow fund and cancel its quarterly dividend.
The Dow Jones industrial average (INDU) closed up 5 points, or 0.1%. It was down by as much as 72 points earlier in the session, following a disappointing report on the housing market.
Rebounding from an 8-point loss, the S&P 500 index (SPX) finished less than 1 point down, or 0.1%, and the Nasdaq composite (COMP) added half a point. The tech-heavy index was 16 points lower earlier.
Stocks gained Tuesday as fears about Europe's debt crisis continued to fade and the euro rallied, rising above the $1.23 level for the first time in more than a week. The three major indexes added more than 2% and finished above key milestone levels.
That momentum initially diminished Wednesday as investors faced disappointing economic reports and less-than-stellar corporate news. But it began to resurface after Obama administration officials confirmed that BP (BP) agreed to put roughly $20 billion in an escrow account to payout claims from the oil spill disaster in the Gulf of Mexico.
"After a tremendous rally yesterday and a mixed bag of economic news this morning, that fact that the market is virtually unchanged is a big win," said Art Hogan, chief market analyst at Jefferies & Co.
President Obama met with BP executives in the White House on Wednesday, including CEO Tony Hayward and the company's chairman, Carl Henric Svanberg.
Following the summit, the company announced it is canceling its quarterly dividend for the rest of the year, and promised it would revisit the issue next year.
In his first address from the Oval Office, the president told the nation Tuesday night he will make BP pay for the costs of cleaning up the oil disaster. He also pushed Congress to move on clean energy legislation.
Shares of BP finished up 1.4%.
Earlier Wednesday, stocks slipped on worse-than-expected housing news and a tempered outlook from FedEx.
While economists anticipated new home construction would ease in May -- the first month after the homebuyer tax credit expired -- the drop was steeper than they expected.
"We expected a decline, but the inventory of unsold new homes fell to a 40-year low," said John Canally, economist at LPL Financial.
And while FedEx (FDX, Fortune 500) posted a fiscal fourth-quarter profit Wednesday morning, the shipping giant said it expects earnings for fiscal 2011 to be "constrained" due to higher costs. The news sent the company's shares down nearly 6% and pressured the broader market earlier in the session.
Meanwhile, the Federal Reserve reported that industrial production climbed 0.2% in May, after rising 0.7% the previous month. Economists were expecting the figure to edge up 0.8%.
Canally said the surge was a "pleasant surprise" and helped curb some prior weakness in stocks.
"The data shows that factory production is still booming, led by exports, so it's comforting to see that the European debt crisis hasn't torpedoed global growth yet," he said.
But Canally warned that market participants will remain anxious about the impact of the Europe's fiscal instability on the global economy.
"The economy is transitioning from a period of recovery to sustainable growth, and as that expansion phase takes hold, it will be choppy," Canally said. "We'll see the market give and take -- take two steps forward and one step back -- but earnings season in July could change the battleground a bit."
Economy. The Commerce Department also said that building permits, a measure of builder confidence, also fell sharply, dropping 5.9% from the previous month.
Another report showed that the Producer Price index (PPI), a key measure of wholesale inflation, fell 0.3% in May after slipping 0.1% in April. The so-called Core PPI, which strips out volatile food and energy prices, rose 0.2%. Economists thought Core PPI would rise 0.1%.
Companies: Mortgage finance giants Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), which have been overseen by the government since September 2008, were ordered by their federal regulator to delist from the New York Stock Exchange. Shares of both were closed nearly 40% lower.
World markets: European shares closed slightly higher Wednesday. Britain's FTSE 100, the CAC 40 in France, and Germany's DAX finished up about 0.2% .
In Asia, Japan's Nikkei spiked 1.8%, while markets in Hong Kong, Taiwan and China were closed for a holiday.
Dollar and commodities: The dollar was higher against rivals. The greenback rose 0.2% against the euro, but the shared currency remained above $1.23.
The edged up 0.1% against the British pound, It was slightly lower on the yen to ¥91.43.
U.S. light crude oil for July delivery rose 73 cents to settle at $77.67 a barrel, and gold for August delivery rose fell $3.90 cents to settle at $1,1230.50 per ounce.
Bonds: Treasury prices edged higher, lowering the 10-year note's yield to 3.28% from 3.31% the day before. Bond prices and yields move in opposite directions.
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.80%||3.88%|
|15 yr fixed||3.20%||3.23%|
|30 yr refi||3.82%||3.93%|
|15 yr refi||3.20%||3.23%|
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