Dow up 401; oil drops below $70

By Charley Blaine and Elizabeth Strott

The Dow Jones industrials jumped more than 400 points today as wild volatility continued to rule markets.

The late-day rally was prompted by crude oil's first close below $70 a barrel in more than a year and reports that bond insurers would seek federal help to solve their problems from the housing bust.

In addition, speculation that Microsoft (MSFT, news, msgs) might bid for Yahoo (YHOO, news, msgs) again helped technology shares move higher. (Microsoft is the publisher of MSN Money.)

The rally may continue Friday, thanks to robust earnings from Google (GOOG, news, msgs) and IBM's relatively bullish guidance from Dow component IBM (IBM, news, msgs). Google was up 10% to $389.50 after hours; IBM was up 2.4% to $93.75.

Stocks in Japan were higher in early trading Friday, and stock index futures were higher in electronic trading.

The Dow closed at 8,979, up 401 points, or 4.7%, on the day. The Standard & Poor's 500 Index jumped 39 points, or 4.3%, to 946, and the Nasdaq Composite Index jumped 89 points, or 5.5%, to 1,718. The gains came a day after the Dow and S&P 500 had their worst one-day percentage declines since the 1987 market crash.

The Dow's change today was its 17th change of a 100 points or more in the last 20 sessions. Its 780-point swing was the sixth straight swing of 700 points or more.

It also left the Dow, S&P 500 and Nasdaq more than 7% above their Friday closes.

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The magnitude of the changes left many observers breathless as any number of stocks saw huge swings. Apple (AAPL, news, msgs) dropped 6.3% to $91.74 in the morning, then jumped 12.1% off that low to $101.89. That was a 4% gain from Wednesday. The stock moved 2.4% to $104.30 in after-hours trading.

"We have a manic-depressive market," Frederic Dickson, chief market strategist at D.A. Davidson, told Bloomberg News.

Crude oil settled at $69.85 a barrel today in New York, down 6.3% on the day. The drop started a sell-off in oil services stocks. Schlumberger (SLB, news, msgs) was down 2.2% to $53.20.

Oil refiners saw shares rise because the price drop means they won't have to pay as much for raw material to process. Valero (VLO, news, msgs) was up 0.6% to $17.62.

Pump prices have been dropping as crude has fallen more than 50% from a peak of $147.27 a barrel on July 11. AAA's Fuel Gauge Report said retail gasoline nationally averaged $3.084 a gallon today, down 4 cents from Wednesday and 25% from a peak of $4.114 on July 17.

Twenty-seven of the 30 Dow stocks showed gains, led by ExxonMobil (XOM, news, msgs), up 11.4% to $69.45. Exxon had fallen nearly 14% on Wednesday. At the same time, 421 S&P 500 stocks were higher on the day, along with 88 stocks in the Nasdaq-100 Index ($NDX.X). The index, which tracks the biggest Nasdaq stocks, was up 69 points, or 5.5%, to 1,313.

Energy prices -- New York close

	Thur.	Wed.	Chg.	Month chg.	YTD chg.
Crude oil (NYMEX) (per barrel)	$69.85	$74.54	-$4.69	-30.59%	-27.22%
Heating oil (per gallon)	$2.1150	$2.1905	-$0.0755	-26.11%	-20.17%
Natural gas (per million BTU)	$6.7030	$6.5920	$0.1110	-9.88%	-10.42%
Unleaded gasoline (per gallon)	$1.6220	$1.7822	-$0.1602	-34.72%	-34.88%

Google's big move

Google said it earned $1.4 billion, or $4.24 a share, in the third quarter on revenue of $4.04 billion, once payments to partners are deducted. That was up from $1.07 billion, or $3.38 a share, a year ago.

Earnings were $4.92 a share before employee stock compensation and other costs. Analysts had expected $4.75, Reuters said, though talk on Wall Street suggested the company would fall short of the estimate.

While the company didn't offer guidance, it conceded that there's so much uncertainty in the economy that it was impossible to comment on how the fourth quarter might turn out, Reuters reported.

The stock closed up 4.1% to $353.02 in regular trading and jumped an additional 9.6% after hours to $386.95. Still, the stock is about 50% lower than its all-time high of $747.24 on Nov. 6, 2007.

Investors also liked what they heard from IBM. Big Blue's shares were up 2% to $93.35 after hours, after a 3.7% gain to $91.52 in regular trading. IBM said gains in services and software revenue offset a decline in computer sales.

Yahoo and Microsoft: Yet another chapter?

The Yahoo speculation began when Microsoft CEO Steve Ballmer said he thinks a deal with Yahoo still makes economic sense. While Ballmer didn't say Microsoft is going to make yet another bid for Yahoo, the market reaction was immediate.

Yahoo was at $11.49, down 2.3% on the day, at 11:25 a.m. ET. Five minutes later, it had jumped to $12.86. At 12:40 p.m. ET, the stock was up to $13.73, a 16.9% gain on the day, before falling back to $12.99 at the close. That's still a 10.6% gain for the day and good for fifth place among S&P 500 stocks. Yahoo is down nearly 45% on the year and 58% below the $31 a share Microsoft offered for the company last winter.

Microsoft closed up 6.8% to $24.19. Tech shares overall were higher. The Select Sector SPDR-Technology (XLK, news, msgs) exchange-traded fund, which tracks tech stocks, was up 5.2% to $16.70.

While traders got excited, Microsoft didn't. The company issued a statement late today saying it "has no interest in acquiring Yahoo. There are no discussions between the two companies."

More signs point to slowdown

The economy continues to throw off crummy news.

The Federal Reserve Bank of Philadelphia's general economic index fell to a reading of negative 37.5 in October, the worst reading since October 1990.

The October data showed a huge decline from the positive 3.8 seen in September. Economists had predicted a reading of negative 10; negative readings indicate contraction.

A report on industrial production was also grim, showing a 2.8% decline in September, the biggest decline since December 1974. Last month's hurricanes were partly to blame, along with the credit freeze and the slowing economy. Economists had been expecting a 0.8% decline last month.

"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," Miller Tabak Chief Bond Strategist Tony Crescenzi wrote in a note to clients.

There was one bit of good news today. Consumer prices were flat in September, the Labor Department reported -- lower than the 0.2% gain economists had expected. And core prices, which exclude volatile food and energy prices, rose 0.1% last month, also lower than an expected 0.2% increase.

Initial jobless claims fell by 16,000 last week to a seasonally adjusted level of 475,000. The decline was bigger than economists had anticipated.

Citigroup, Merrill post losses

Citigroup (C, news, msgs) this morning reported a third-quarter loss of $2.8 billion, or 60 cents per share, a huge drop from the profit of $2.2 billion, or 44 cents per share, the banking giant earned last year.

Still, Citi's results beat analysts' expectations of a loss of 70 cents a share.

Shares were down 2% to $15.90.

Citigroup wrote down $4.4 billion in bad debts related to mortgages and other assets and posted loan losses of $4.9 billion.

"While our third-quarter results reflect both a difficult environment as well as continued write-downs on our legacy assets, we are making excellent progress on the parts of our business we control, including expense reduction, head-count and balance-sheet and capital management," Citigroup CEO Vikram Pandit said in a statement.

Meanwhile, Merrill Lynch (MER, news, msgs) reported a worse-than-expected loss.

Merrill lost $5.15 billion, or $5.58 per share, in the third quarter, far worse than the loss of $2.24 billion, or $2.82 per share, last year. Wall Street was looking for a loss of $5.22 per share.

Merrill wrote down $5.7 billion on collateralized debt obligations.

In September, Merrill agreed to be acquired by Bank of America (BAC, news, msgs) for $29 per share.

Merrill stock was up 0.6% to $18.35 on the day.

"This market has already discounted bad earnings," Avalon Partners' Cardillo told CNNMoney. "Everyone knew earnings wouldn't be good."

Banks and securities firms have reported more than $640 billion in losses, write-downs and credit provisions since the start of 2007 and have raised $611 billion in capital to offset those losses, according to data compiled by Bloomberg.

Switzerland backs UBS with billions

Switzerland has become the latest country to take steps to inject capital into its banking system.

The Swiss National Bank will take on $60 billion of UBS (UBS, news, msgs) assets, a move it said "will result in a sustainable reduction of strains in the Swiss financial system."

Switzerland's effort follows similar plans announced by the United Kingdom and the United States.

Shares of UBS were up 4% to $17.33.

Weak forecast from eBay

Shares of online retailer eBay (EBAY, news, msgs) fell 2.4% to $14.97 after the company late Wednesday gave a weak forecast for the fourth quarter.

The company said it earned $492 million, or 38 cents per share, in the third quarter. Excluding charges, eBay earned 46 cents per share, topping Wall Street's estimate of 41 cents per share.

But eBay said it expects to earn 39 to 41 cents per share in the current quarter, which is well below the Street's expectation of 49 cents.

"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," analysts at Deutsche Bank in a note to clients.

Andy Rosenbaum contributed to this report.

Short hits from the markets -- New York close

	Thur.	Wed.	Chg.	Month chg.	YTD chg.
Treasurys
13-week Treasury bill	0.435%	0.200%	0.235	-51.67%	-86.15%
5-year Treasury note yield	2.812%	2.888%	-0.076	-5.83%	-18.61%
10-year Treasury note yield	3.936%	4.011%	-0.075	2.85%	-2.45%
30-year Treasury bond yield	4.227%	4.248%	-0.021	-1.81%	-5.20%
Currencies
U.S. Dollar Index	82.780	82.345	0.435	4.31%	7.93%
British pound in dollars	$1.7349	$1.7322	0.0027	-2.67%	-12.79%
Dollar in British pounds	£0.5764	£0.5773	-0.0009	2.75%	14.66%
Euro in dollars	$1.3479	$1.3486	-0.0007	-4.41%	-7.78%
Dollar in euros	€ 0.7419	€ 0.7415	0.0004	4.61%	8.43%
Dollar in yen	101.40	101.69	-0.29	-4.37%	-9.34%
Canadian dollar in U.S. dollars	$0.848	$0.849	-$0.0009	-9.88%	-14.62%
U.S. dollar in Canadian dollars	$1.181	$1.178	$0.0025	11.00%	17.17%
Commodities
Gold	$804.50	$839.00	-$34.50	-8.66%	-4.00%
Copper	$2.0855	$2.2105	-$0.13	-27.56%	-31.42%
Silver	$9.6070	$10.1800	-$0.57	-21.74%	-35.61%
Corn	$3.8450	$3.8800	-$0.03	-21.13%	-15.59%
Crude oil (NYMEX) (per barrel)	$69.85	$74.54	-$4.69	-30.59%	-27.22%