U.S. Stock Indexes End Higher After Late Rally Ahead Of Close

NEW YORK (MarketWatch) -- U.S. stocks shot dramatically higher in a late-session bounce back from the prior day's rout, with energy shares pacing the climb after the price of crude dropped below $70 a barrel for the first time in more than a year.

After trading in a 815-point range, the Dow Jones Industrial Average powered higher in the final hour, rising 401 points, or 4.7%, to end at 8.979.26, a far cry from intraday lows that had the blue-chip benchmark down more nearly 400 points.

"We've got options expiration for October tomorrow and we've seen that volatility impact everything today from stocks to gold and oil," said Paul Mendelsohn, director of investments at Hinsdale Associates.

"It's really a market without conviction. Anyone selling in this market has a roughly half-hour time horizon, and anyone buying has to have at least a one-year horizon. That is why we have such volatility -- the Wall Street fat cats are selling and retail is just sitting there watching," said Jack Ablin, chief Investment officer, Harris Private Bank.

Of the blue-chip index's 30 components, 28 closed with gains, led by oil giant Exxon Mobil Corp. , up 8.1%.

The S&P 500 climbed 38.59 points, or 4.3%, to 946.43, while the Nasdaq Composite gained 89.38 points, or 5.5%, to 1,717.71.

Volume on the New York Stock Exchange neared 2 billion, with advancers topped decliners more than 2 to 1. On the Nasdaq, almost 1.6 billion shares traded, and advancers ran ahead of decliners, also by more than 2 to 1.

Stocks had fallen steeply after the Federal Reserve Bank of Philadelphia reported conditions in the region's manufacturing sector deteriorated significantly in October. .

It was one of just several pieces of economic data that painted a grim picture.

"The financial markets are now in the process of adjusting for the dark period of economic activity that is now upon us, and data such as today's will further the process," said Tony Crescenzi, chief bond market strategist at Miller & Tabak.

Liquid gold

Gold futures tumbled to monthly lows, amid hedge-fund liquidation, with gold for December delivery falling $34.50, or 4.1%, to end at $804.50 an ounce .

Oil also fell, with crude futures dropping below $70 a barrel for the first time in more than a year. ..

The dollar extended gains against the yen but erased them against the euro as Wall Street rebounded.

Treasury prices fell with 10-year note yields rising to 3.965%. .

Earlier, stocks had shown initial enthusiasm for a report that consumer prices were contained in September.

Separately, the Labor Department reported initial jobless claims fell last week, while the four-week average hit a seven-year high. .

But in another report, the Federal Reserve said U.S. industrial production fell 2.8% in September, with hurricanes and a strike at Boeing Co. having an impact.

U.S. stocks crumbled on Wednesday in the wake of downbeat economic data -- notably the worst retail sales figures in three years. The Dow Jones Industrial Average dropped 733 points, the S&P 500 fell 90 points and the Nasdaq Composite lost 150 points.

"Stocks are not trading based on valuation, but as a source of cash," said Marc Pado, U.S. market strategist at Cantor Fitzgerald, of the prior day's declines, which had the Dow hit with its second-biggest daily point decline ever.

Profit reports

On the earnings front, Merrill Lynch & Co. Inc. said it lost more than $5 billion and Citigroup Inc. lost $2.8 billion in the third quarter. Bank of New York Mellon Corp. and PNC Financial Services posted lower quarterly profits as well.

Outside of financials, Nokia Corp. reported a 30% profit drop and Harley-Davidson Inc. tallied a 37% decrease, while United Technologies Corp. managed to generate 6% profit growth for the third quarter.

Shares of eBay Inc. came under pressure, down 2.4, as the auctioneer lowered its annual earnings outlook.

"We think the stock will remain under pressure, particularly as business trends on-site appear to have worsened dramatically in September, largely due to the structural issues facing eBay," said analysts at Deutsche Bank, who reiterated a sell rating.

In developments overseas, the European Central Bank said it would provide up to $6.7 billion in liquidity to the central bank of Hungary, which is fighting turmoil in its financial markets. .

Shares in Europe fell, barely escaping a fresh give-year low, with the pan-European Stoxx index falling 5%, bringing losses since Tuesday to roughly 12%.

In London, money-market rates declined after central banks gave $254 billion in emergency funds to calm credit markets and Switzerland provided funds to UBS , one of Europe's banks hit the hardest by global credit troubles.

Japanese stocks were thrashed, sending the Nikkei 225 Average down more than 11% in its worst single-day performance in more than 20 years.

By Kate Gibson