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Wall Street stocks climbed for a second session on Wednesday, after a stop-start day of trading that featured bad news from regional banks, a lurch in oil prices that boosted related stocks but trimmed advances elsewhere and a steady rally in materials.
A drop in crude prices initially sent markets into positive territory, a trend reinforced by data showing an unexpected rise in orders for core durable goods in April.
By mid-afternoon in New York, oil prices had made an abrupt U-turn, retracing earlier declines. This combined with a sell-off in financials to forestall the positive momentum - but only temporarily.
A rally in materials stocks, which followed some commodity prices higher, helped kick the broader equity markets back into the black in late afternoon.
By the end of the day, materials had added 2.8 per cent, breaking a four session loosing streak and powering to their biggest one day gains in a month.
The benchmark S&P 500 closed 0.4 per cent higher at 1,390.87, while the Dow Jones Industrial Average ended the day up 0.4 per cent at 12,594.03. The Nasdaq Composite rose 0.2 per cent to 2,486.70.
On Tuesday, falling crude prices and some post-holiday cheer helped markets bounce back from their biggest weekly fall in three months. The momentum carried investors through another round of dismal housing statistics and a survey showing languishing consumer confidence.
The consumer discretionary sector held onto narrow gains on Wednesday, adding 0.4 per cent thanks to decent results from American Eagle Outfitters and Polo Ralph Lauren.
American Eagle shares, which have lost 36 per cent of their value over the last year, clawed back 8.1 per cent to $18.61.
Polo Ralph Lauren surged 11.7 per cent to $69 after the clothing brand reported an unexpected increase in fourth-quarter profit, helped by its new line for JC Penney and sales in Europe.
Expedia also made ground, advancing 4.7 per cent to $22.75 on speculation that chairman Barry Diller might attempt to take the internet travel agency private.
Despite pockets of outperformance, the picture for retailers remains bleak. According to the International Council of Shopping Centers, weekly chain store sales stalled last week as gasoline prices continued to drag on consumer spending.
Investment banks were in the spotlight again on Wednesday after JPMorgan became the latest brokerage to cut its earnings estimates for the sector, citing Goldman Sachs, Lehman Brothers and Morgan Stanley in particular.
JPMorgan analysts argued that less effective hedges, slowing client activity and yet more write-offs would hurt results. The group advised investors to steer clear of the sector.
The sector swung between gains and losses during the day before settling up 0.4 per cent. Lehman slipped 1 per cent to $36.84, hit also by suggestions it might need to raise more capital, while Goldman and Morgan added 0.5 per cent to $174.83 and 1.3 per cent to $42.77 respectively.
AIG, the insurance group, was among the sector’s biggest fallers, dropping 4.7 per cent to $34.91 after a Citi analyst suggested it might need more capital on top of the $20.3bn it has raised.
Regional commercial banks also came under pressure after KeyCorp, the third-largest bank in Ohio, doubled its forecast for loans that are unlikely to be repaid.
KeyCorp slumped 10.4 per cent to $19.66 and was followed down by Regions Financial and Huntington Bancshares, which dropped 5 per cent to $18.08 and 4.9 per cent to $9.04 respectively.
Commercial banks, as measured by the KBW index, have lost over 12 per cent of their value since the start of the month and are down about 37 per cent since their highs in February 2007.
Energy-sensitive stocks such as carmakers swung from profits to losses as energy prices rebounded above $130. Ford fell 0.3 per cent to $6.78 while General Motors lost 1.6 per cent to $17.15.
The volte-face in oil prices also helped energy groups overturn early losses and snap a four-session losing streak. Chevron rose 0.8 per cent to $100.42, ConocoPhillips added 2.1 per cent to $92.56, while the sector as a whole rose 1.5 per cent.
In materials, Ashland, Allegheny Technologies and Monsanto were among the leading gainers, advancing 5.2 per cent to $58.19, 5.1 per cent to $76.73 and 5.3 per cent to $125.32.