Financials gain and stocks rebound

NEW YORK - The stock market closed higher yesterday, led by gains in shares of banks and drugmakers, while energy companies were held back by a drop in crude oil.

The Dow Jones industrial average closed up 53 points after trading above 10,700 for the first time in 15 months. Broader indicators also advanced. Treasury prices fell, pushing interest rates higher, after jumping Tuesday.

Financial stocks led the rally as the appearance of leading bank officials on Capitol Hill turned out to be less fractious than expected. The bankers endured scolding from lawmakers and acknowledged making missteps during the financial crisis.

Executives including Goldman Sachs Group Inc. chairman and chief executive officer Lloyd Blankfein, JPMorgan Chase & Co. CEO Jamie Dimon, Morgan Stanley chairman John Mack, and Bank of American Corp. CEO Brian Moynihan appeared before the Financial Crisis Inquiry Commission. It was the first meeting of the bipartisan panel, which is investigating the near collapse of the financial system in the fall of 2008.

Meanwhile, the Federal Reserve provided some optimism about the economy in its report on regional economic conditions. The Fed's Beige Book report said the economic recovery was spreading geographically, even though millions of Americans are still struggling to find jobs.

In a sign that investors may be becoming defensive, industries seen as safer in a weak economy such as health care and utilities posted some of the day's biggest gains. Drugmaker Merck & Co. Inc. was the biggest gainer in the Dow 30 after an analyst upgrade.

The Dow rose 53.51, or 0.50 percent, to 10,680.77. The index traded above 10,700 for the first time since Oct. 1, 2008, rising as high as 10,709.11.

The broader Standard & Poor's 500 index rose 9.46, or 0.83 percent, to 1,145.68, and the Nasdaq composite index rose 25.59, or 1.12 percent, to 2,307.90.

Stephen Wood, chief market strategist at Russell Investments, expects that improvements in economic and corporate news in 2010 will be incremental and that big gains seen in the market in the last 10 months will taper off.

"This might be like running on the beach with your shoes on. It's going to be a real slog," Wood said.

Crude oil fell $1.14 to settle at $79.65 a barrel on the New York Mercantile Exchange. The drop in oil hurt stocks of energy companies.

The dollar fell against most other major currencies, while gold rose.

Investors sold shares of Google Inc. after the Internet search company threatened to withdraw from China over censorship and computer-security concerns. Google shares fell $3.39, or 0.57 percent, to $587.09. Shares of China's largest search engine, Baidu Inc., rose $52.99, or 13.71 percent, to $439.48.

In other trading, shares of Chevron Corp. fell 61 cents, or 0.76 percent, to $79.80 as oil dropped.

The Russell 2000 index of smaller companies rose 8.06, or 1.27 percent, to 643.56.