Stocks make a U-turn, rising after big decline

Specialist Robert Tuccillo, center, works with traders on the floor of the New York Stock Exchange Monday, April 9, 2012. Stocks are opening sharply higher, Wednesday, April 11, 2012, a day after their worst loss of the year. (AP Photo/Richard Drew)

Specialist Robert Tuccillo, center, works with traders on the floor of the New York Stock Exchange Monday, April 9, 2012. Stocks are opening sharply higher, Wednesday, April 11, 2012, a day after their worst loss of the year. (AP Photo/Richard Drew)

NEW YORK (AP) ? Investor fear calmed on both sides of the Atlantic on Wednesday, one day after the worst plunge on Wall Street this year.

In the United States, Alcoa reported a surprise profit after the stock market closed on Tuesday, raising hope that corporate earnings may not be as weak as analysts think. More reports will trickle out over the next few weeks.

And in Europe, borrowing costs for Spain edged down after nearly reaching 6 percent the day before. Seven percent is generally considered the point at which countries must seek bailouts.

The result was a U-turn on Wall Street. The Dow Jones industrial average climbed as much as 129 points in early trading, and was up 89 points at 12,805 around noon. That was a stark turnaround from a 214-point drop Tuesday, its biggest this year and the fifth straight day of declines.

European markets rose, too. Stocks climbed roughly 1 percent in the major capitals after losing 2 to 3 percent the day before. The dollar and Treasury prices fell, signs that investors are more willing to put money in stocks.

The broader Standard & Poor's 500 rose 11 points to 1,369. The Nasdaq composite index re-crossed the closely watched 3,000 mark, rising 28 points to 3,019.

Alcoa soared 8 percent in the morning, investors' first chance to react to the company's report that it turned a quarterly profit and handily beat the expectations of Wall Street analysts, who were predicting a loss. Since Alcoa is the first company in the Dow to report earnings, its results have a greater ability to move the market than companies that report later.

Investors also seemed to latch onto a few pieces of good news out of Europe. The rate on Spain's 10-year bonds dropped back to 5.87 percent, down from Tuesday's four-month high of 5.93 percent. That means Spain has to pay less to borrow money, which means investors are more confident in its financial health.

But there were other signs that problems in Europe are still hibernating rather than solved. Spain's borrowing costs are still dangerously high. Italy sold 12-month bonds but was forced to pay more than double the interest rate compared to last month, a concession to investors who are nervous about the country's health. Even Germany, whose bonds are considered a much safer investment, struggled in its own debt sale. Germany failed to sell all the 10-year bonds that it intended to on the open market.

Upcoming elections in Greece and France also threaten to unravel some of the uneasy peace that has been reached between the weak and the strong countries in Europe. New leaders could unwind the deals that have already been hammered out, requiring weaker countries like Greece to cut spending in order to get bailout loans. Uncertainty in Greece rose to a new level Wednesday when the country announced it would hold parliamentary elections months ahead of schedule.

In Cleveland, Planned Financial Services CEO Frank Fantozzi hoped that Alcoa's good earnings portended more strong reports. But he was still keeping a close eye on Europe.

"You have people kind of on pins and needles right now," Fantozzi said. "Europe is spiraling into recession. The question is, is it going to ripple across the Atlantic to the United States?"

The Dow's 550-point plunge of the previous five days is a molehill compared to the mountain of last summer's frightening swings. That included an eight-day plunge in July and August when the market shed 858 points as Congress bickered about government debt limits and the S&P prepared to downgrade the U.S. debt rating.

In recent weeks, Europe's debt crisis and concerns about U.S. earnings haven't been the only problems. There are also signs that jobs growth is slowing and that the Federal Reserve is disinclined to pump more money into the economy. Some of the sell-off is also probably from investors trying to get out of the market now with their first-quarter gains still intact. If the Dow closes higher, it will be the first time since April 2 and only the second gain since the second quarter began.

The uncertain start to the market's second quarter follows its best first quarter in more than a decade. That has enabled it to handle recent negative news.

"It's like a person," Fantozzi said. "If you're feeling good overall and a couple negative things happen, you just shrug it off. If you're feeling lousy overall and then you get some good news, you still feel lousy."

Oil prices inched above $102 per barrel on the New York Mercantile Exchange, reversing Tuesday's decline. Though they're down from the nearly $110 per barrel reached last month, they're still above October's price of $75.

Investors remain concerned that high gas prices could rekindle a recession, forcing companies to raise prices and crimping household budgets.

Among stocks making big moves:

?Avon rose 1 percent, two days after naming a new CEO that it hopes will turn around a company plagued by bribery allegations and an unwanted takeover bid.

?Owens-Illinois Inc., which makes glass containers for the food and beverage industries, jumped 7 percent. The company said it expects its earnings per share to surge 35 percent because of more productive manufacturing methods and cost cuts.

Associated Press

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