Bank raises hopes in mixed session

Bank of America beat expectations. It caused a rally that was stilled by higher oil prices.

NEW YORK - Stocks turned in a mixed performance yesterday as the price of oil regained ground and investors decided to cash in some gains from the stock market's big rally last week.

The tame session unfolded as oil rose on concerns that the threat of new sanctions against Iran over its nuclear program could escalate tensions in the Middle East. Light, sweet crude rose $2.16 to settle at $131.04 a barrel on the New York Mercantile Exchange.

The rise in oil offset initial market enthusiasm after Bank of America Corp. posted results that beat expectations, raising hope the credit crisis might be easing for the nation's biggest retail banks. Bank of America reported that higher investment banking and record revenue helped drive earnings during the second quarter.

With Bank of America's results, four of the nation's five biggest banks have now reported better-than-expected earnings, and that's raising hopes that the financial sector is starting to recover from the year-old credit crisis.

The market was also uneasy about drug makers Merck & Co. and Schering-Plough Corp. Both pharmaceutical companies fell after a new study showed their cholesterol drug Vytorin did not meet its main goals.

The Dow Jones industrial average fell 29.23, or 0.25 percent, to 11,467.34 after moving in and out of positive territory.

Broader indexes showed more modest declines. The Standard & Poor's 500 index slipped 0.68, or 0.05 percent, to 1,260.00; and the Nasdaq composite index dropped 3.25, or 0.14 percent, to 2,279.53.

The dollar was mixed against other major currencies, while gold prices rose.

One hundred fifty-eight members of the Standard & Poor's 500 index and 10 of the 30 Dow industrials are slated to post results this week. One of the biggest yesterday was Bank of America, which reported that increased bad debt due to the housing slump pushed profits down 41 percent. However, it still surpassed expectations due to a solid performance in its business not tied to real estate. The stock rose $1.07, or 3.9 percent, to $28.56.

But another Dow component that weighed in after the closing bell could rattle investor sentiment. American Express Co.'s second-quarter profit tumbled 38 percent - results that came in well short of expectations - as consumer spending slowed and credit indicators deteriorated beyond the company's expectations. The stock fell $1.29, or 3.1 percent, to $40.90 on the day and declined more than 10 percent in after-hours electronic trading.

Investors were somewhat optimistic during yesterday's session that mergers and acquisitions, which have been sluggish since the credit crisis began last year, might be reviving. Swiss drug maker Roche Holding announced plans to acquire the stake in Genentech Inc. it doesn't already own for $43.7 billion, making it the seventh-largest pharmaceuticals company in the United States. Shares of Genentech were among the best performers during the session, rising $12.06, or 14.7 percent, to $93.88.

Yahoo Inc. fell 78 cents, or 3.5 percent, to $21.67 after the Internet portal staved off an attempt by activist shareholder Carl Icahn to take control and sell it. Icahn, who has argued in favor of selling Yahoo to Microsoft Corp., will become a Yahoo director along with two of his nominees.

The Russell 2000 index of smaller companies rose 4.55, or 0.66 percent, to 697.63.

Overseas, markets in Japan were closed yesterday for a holiday. Britain's FTSE 100 rose 0.52 percent, Germany's DAX index added 0.66 percent, and France's CAC-40 rose 0.65 percent.