Rally ahead of Goldman news

NEW YORK - Investors gave the stock market a big last-hour turnaround on just the anticipation of Goldman Sachs' settling the government's civil-fraud charges.

As word spread Thursday that the Securities and Exchange Commission had scheduled a late-afternoon announcement, investors began buying on the belief that the government and Goldman Sachs Group Inc. had settled the charges that grew out of the sale of securities based on risky mortgages.

The $550 million settlement was announced less than an hour after trading ended.

The settlement lifts uncertainty that has hovered around Goldman since the charges were announced April 16. Expectations of a deal were enough to make traders temporarily set aside concerns about the economy. Disappointing economic reports had sent the Dow Jones industrial average down nearly 100 points in late trading. The Dow scrambled back to a loss of just 7 by the close. Broader indexes were narrowly mixed.

Goldman was trading at about $140 a share when word of the pending announcement came. The stock then soared to close at $145.22, up $6.16, and shot up to $153.45 in after-hours trading.

A little more uncertainty was lifted from the market when the Senate passed and sent to President Obama the financial-regulation bill. However, because regulations that will implement the bill's provisions have yet to be written, traders were still wary.

The Dow fell 7.41, or 0.07 percent, to 10,359.31. The Standard & Poor's 500 index rose 1.31, or 0.12 percent, to 1,096.48, while the Nasdaq composite index fell 0.76, or 0.03 percent, to 2,249.08.

For much of the day, the market was down on pessimism about weak economic reports. Steep drops reported in the Empire State and Philadelphia Fed Manufacturing indexes pointed to a slowing in manufacturing activity in the Northeast. Meanwhile, the Federal Reserve reported modest growth in industrial output nationwide. And the Labor Department said first-time claims for unemployment benefits fell last week, but that was largely because of seasonal factors.

JPMorgan Chase & Co., the first big bank to report its second-quarter earnings, said it had set aside less money to cover losses on failed loans. That is a sign that mortgage and loan defaults may be moderating. But chief executive officer Jamie Dimon kept a cautious tone in speaking about future economic growth.

Shares of JPMorgan Chase rose 11 cents to close at $40.46. Shares of several other big banks fell. Bank of America Corp. shares dropped 28 cents, to $15.39, and Citigroup Inc. shares fell 5 cents, to $4.16. Both companies report earnings Tuesday.

Caterpillar Inc. shares fell 19 cents, to $66.51, on the downbeat manufacturing reports.

The euro climbed above $1.28 for the first time in more than two months Thursday as investors worried about the strength of the recovery in the United States.