Bargains lure investors back into the market

NEW YORK » Wall Street finished moderately higher in fitful trading yesterday as investors, still nervous about the economy, decided to buy back into a stock market pummeled by three straight days of losses.

With the market having largely priced in the possibility of a recession, many believe there are plenty of valuable stocks at cheap prices.

Before yesterday, the Dow Jones industrial average had fallen this week by 543 points, or 4.26 percent, giving up all of last week's sharp gains.

Though the market ended up rising yesterday, trading was extremely fickle due to a batch of gloomy data that included declining January sales at major retailers, a drop in December sales of pending homes, and a disappointing outlook from Internet networking supplier Cisco Systems Inc.

"We're kind of trying to create a silk purse out of a sow's ear here," said Hugh Johnson, chief investment officer of Johnson Illington Advisors. "The earnings are lousy, the economic numbers are lousy."

The Dow rose 46.90, or 0.38 percent, to 12,247.00 after trading down about 80 points and up about 130.

The index remains more than 13 percent below its record close on Oct. 9, 2007 of 14,164.53.

The Russell 2000 index of smaller companies rose 10.29, or 1.49 percent, to 702.78.

Advancing issues outnumbered declining shares by nearly 2 to 1 on the New York Stock Exchange, where consolidated volume came to 4.44 billion shares, down from 3.89 billion on Wednesday.

Broader stock indicators also recovered some ground. The Standard & Poor's 500 index rose 10.46, or 0.79 percent, to 1,336.91.

The technology-heavy Nasdaq composite index rose 14.28, or 0.63 percent, to 2,293.03.

Government bonds fell. The 10-year Treasury note's yield, which moves opposite its price, rose to 3.76 percent from 3.60 percent late Wed-nesday.

Light, sweet crude oil rose 97 cents to settle at $88.11 a barrel on the New York Mercantile Exchange.

Gold prices also climbed.

Oil prices had been gradually declining, so it's possible a slower economy is keeping inflation from accelerating.

Investors may have been encouraged to buy back into stocks due to a rise in the dollar, whose decline over the past several months has contributed to worries about inflation and a possible drop in foreign interest in U.S. investments.

Another argument for bargain hunting yesterday was that the recent spate of negative economic data raises the likelihood of the Federal Reserve lowering interest rates again to spur growth.

Atlanta Fed President Dennis Lockhart said yesterday the Fed's "focus, religiously, is on the general economy, the real economy."

Moreover, the stock market often portends economic declines, rather than the other way around.

"Stocks do worse during times of slow growth than they do during recession," said Brian Gendreau, investment strategist for ING Investment Management. "If we're in a shallow and short recession, for all anyone knows, we might be halfway through."