NEW YORK Stocks made a stunning comeback Thursday, as investors snapped up some of the financial sector's stronger players and pumped money into the materials and transportation sectors. The Dow Jones industrial average rose more than 160 points.
A drop in crude below $101 a barrel also helped reverse Wall Street's early losses, particularly among automaker and transportation stocks like railroad CSX Corp., Ford Motor Co. and General Motors Corp.
Early in the day, most bank stocks sold off on nervousness about Lehman Brothers Holdings Inc.'s announcement Wednesday that it plans to sell its investment management unit and spin off its commercial real estate assets. The company is seeking to raise cash after making bad bets on holdings tied to real estate.
Traders and analysts appeared unimpressed with the steps outlined by the nation's No. 4 investment bank, punishing the stock. Citigroup and Goldman Sachs lowered their ratings on the stock to "hold" from "buy." Lehman fell $3.03, or nearly 42 percent, to close at $4.22.
"The steps they're taking are being seen by Wall Street as too little, too late," said Arthur Hogan, chief market analyst at Jefferies & Co., referring to Lehman. "You're looking at a company that was a $10 billion company last week that is a $3 billion company today."
But later in the day, major names including JPMorgan Chase & Co., Wells Fargo & Co., and even the embattled Washington Mutual Inc. soared.
"Not everybody's in trouble, and people are realizing that," said Anthony Conroy, managing director and head trader for BNY ConvergEx Group. He added, however, that the market is very rumor-driven right now which can make for very volatile price movements.
According to preliminary calculations, the Dow rose 164.79, or 1.46 percent, to 11,433.71, after falling by as many as 170 points in the early going.
Broader stock indicators rose. The Standard & Poor's 500 index rose 17.01, or 1.38 percent, to 1,249.05, while the Nasdaq composite index rose 29.52, or 1.32 percent, to 2,258.22.
The market has been changing moods feverishly this week, and rallies in the indexes on Thursday belied an underlying weakness. Declining issues outnumbered advancers by about 9 to 7 on the New York Stock Exchange, where volume came to 1.45 billion shares.
The Russell 2000 index of smaller companies rose 1.84, or 0.26 percent, to 719.00.
A few marquee financial names on Wall Street logged steep declines as investors worried about the health of their balance sheets. Merrill Lynch & Co. fell $3.87, or 16.6 percent, to $19.43, and Wachovia Corp. dropped 80 cents, or 5.3 percent, to $14.28.
But JPMorgan rose $2.25, or 5.7 percent, to $41.65; Wells Fargo rose $2.15, or 6.8 percent, to $33.85; and WaMu recovered from a steep loss to finish up 51 cents, or 22 percent, at $2.83.
Government bond prices ended little changed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was at 3.63 percent, the same as late Wednesday. The dollar was mixed against most other major currencies, while gold prices fell sharply.
Light, sweet crude fell $1.71 to settle at $100.87 a barrel on the New York Mercantile Exchange as a strengthening dollar added to investors' buying power. Still, gasoline prices were up, and the market kept at watchful eye on Hurricane Ike amid worries that it could damage energy installations in the Gulf of Mexico.
Investors also faced fresh concerns about consumers after the Labor Department reported that the number of people seeking jobless benefits dropped 6,000 last week to a seasonally adjusted 445,000. Analysts, on average, had expected a reading of 440,000. The four-week moving average rose slightly to 440,000.
The average number of claims remains at a level that some economists say is worrisome. And the report comes a week after the government said the nation's unemployment rate rose to 6.1 percent in August, a five-year high. A shaky job market can be hard on consumers who also face tighter credit and a weak housing market. That worries investors because consumer spending accounts for more than two-thirds of U.S. economic activity.
In other economic news, the Commerce Department said the nation's trade deficit jumped in July to the highest level in 16 months as oil imports reached a new high. That offset strong export growth.
Transportation names advanced as falling oil eased worries about fuel costs and after railroad CSX Corp. raised its 2008 and long-term financial forecasts. CSX rose $5.85, or 10.7 percent, to $60.70.
UAL Corp.'s United Airlines advanced $1.15, or 11.5 percent, to $11.12. Continental Airlines Inc. rose $2.44, or 15.2 percent, to $18.51 after the company said it expects to draw more money from customers as it cuts costs and raises fees for checked bags.
General Motors Corp. rose $1.33, or 11.7 percent, to $12.75. GM was the biggest gainer among the 30 stocks comprising the Dow industrials.
Overseas, Japan's Nikkei stock average fell 1.98 percent. Britain's FTSE 100 fell 0.89 percent, Germany's DAX index fell 0.51 percent, and France's CAC-40 lost 0.81 percent.