NEW YORK (MarketWatch) -- The stock market's late Thursday turnaround proved modest, but still enough to snap the Dow Jones Industrial Average's longest losing streak since early October in the wake of Lehman Brothers Holdings Inc.'s collapse.
"We're certainly trying to march back," said Peter Bookvar, equity strategist at Miller Tabak as stocks pared earlier losses that had the Dow lapsing below the 8,000 level for the first time since November.
"We had rallied 25% from November lows. It's too soon to say if it's a natural pullback from that rally or do we resume that downward trend," he said.
As has been the case in recent days, financials and energy shares fronted the early declines, while defensive plays -- namely health care and consumer staples -- bled the least.
By Thursday's close, materials and consumer discretionary shares fronted gains, while financials proved the sole lagging sector among the S&P 500's 10 industry groups.
"We've done a lot of damage to the major indices in a short period of time. We do get to a point where we've priced too much into this," said Art Hogan, chief market strategist at Jefferies & Co. said Art Hogan, chief market strategist at Jefferies & Co.
"Tomorrow is options expirations day, and also a day that is popular to bring in short positions. There has been a lot of buzz that we should get a bounce tomorrow, so technically, why not beat the Christmas rush and cover short positions today," said Hogan.
On the Dow, Citigroup Inc.
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and Bank of America Corp.
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shed an astounding 20% or more of their market value within the first two hours of trading.
Both recovered some, with Citigroup finishing more than 15% lower and Bank of America off 18%.
"We have earnings from Citibank tomorrow and Bank of America on Tuesday that will help clarify a lot of the fears out there," said Bookvar.
Investors had blasted Bank of America on word the government is dipping into its $700 billion bailout war chest to help the firm digest its acquisition of Merrill Lynch & Co. while Citigroup shares were slammed ahead of the bank's fourth-quarter earnings report on Friday, with the firm expected to report a loss of as much as $10 billion.
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Earlier Thursday, a triple-digit slide had the Dow Jones Industrial Average
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briefly breaching the 8,000 level, sliding to an intraday low of 7,995.13.
But at the finish, the blue-chip index was up 12.35 points at 8,212.49, with 18 of its 30 components posting gains for the day.
The S&P 500
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gained 1.12 points to 843.73, while the Nasdaq Composite
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rose 22.2 points to 1,511.84.
"The ongoing trouble in the financial industry seems to be the primary factor underlying the big spike in volatility over the past seven trading sessions," said Frederic Ruffy, options strategist, WhatsTrading.com.
The return of fear was reflected in the CBOE Volatility Index, which was back to levels last seen on Dec. 16.
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The Dow's most recent slide marked the longest losing streak since the eight-day drop that ended Oct. 10. That particular bout of declines ended with the Dow rallying more than 900 points on Monday, Oct. 13, on global government intervention to revive the banking sector.
Prior to October's run of loses, the Dow's last longest losing streak was an eight-day drop that ended Sept. 21, 2001.
"The last two weeks of December and the first week of this year, there was a certain amount of enthusiasm based on three things: excitement about aggressive money policy, excitement about aggressive fiscal stimulus, and the inherent optimism that historically comes with the start of a new year. Unfortunately you have to juxtapose that against a much harsher reality when we look at the magnitude of issues we're facing," said Hogan.
Kate Gibson is a reporter for MarketWatch, based in New York.