NEW YORK (CNNfn) - U.S. stocks rose Wednesday as hopes for an economic turnaround overcame the latest round of bad news on corporate profits.
But Wall Street's strongest finish of the week masked a rocky session. Stocks fell at the open and rallied by noon before pulling back amid questions over whether earnings have really bottomed.
"It was a confounding day," David Briggs, trader at Federated Investors, told CNNfn's Street Sweep. "There's a tremendous amount of uncertainty out there and that's what you're seeing playing out."
The Nasdaq composite index rose as much as 40 points and fell nearly 19 points before ending at 2,031.16, a 38.50-point gain. The Dow Jones industrial average, which swung within a 138-point range, rose 50.66 points to 10,647.33. A broader index, the S&P 500, advanced 10.56, or 0.9 percent, to 1,223.14.
A report signaling that the economy will strengthen in the months ahead helped stocks. But Tellabs, Infineon Technologies, and Jabil Circuit all warned that results will miss targets, the latest casualties of an economy that began weakening last summer.
In one week, the Federal Reserve is expected to cut interest rates for the sixth time this year – a move that historically helps profits.
Still, Chuck Carlson, portfolio manager at Horizon Investment Services, expects more trouble ahead for the market.
"I think people who are betting that the worst is over are being overly optimistic," he said.
But others say missing any rally could be riskier than avoiding equities.
"By the time companies make announcements that things are better, stocks will already have bottomed," Greg Kuhn, senior portfolio manager at Thoroughbred Partners, told CNNfn's Street Sweep.
More stocks rose than fell. On the New York Stock Exchange, advancing issues topped declining ones 1,833 to 1,271 as 1.3 billion shares changed hands. Nasdaq winners beat losers 1,936 to 1,821 as 2 billion shares traded.
In other markets, the dollar rose against yen and was flat versus the euro. Treasury securities advanced.
A turnaround
Stocks climbed to session highs after the Conference Board, a private research group, said its Index of Leading Economic Indicators rose 0.5 percent in May. For the forecasting gauge, it was the largest increase in more than two years and more than twice the gain analysts forecast.
"I think the (report on leading economic indicators) is much more important than people think," Jack Baker, head of equities at Putnam Lovell Securities, told CNNfn's Market Call. "Maybe in the fourth quarter of this year and the first quarter of next year, the economy will in fact pick up."
A broad array of companies gained, including Caterpillar (CAT: up $1.61 to $55.50, Research, Estimates), J.P. Morgan Chase (JPM: up $1.08 to $45.60, Research, Estimates), and General Electric (GE: up $1.90 to $50.77, Research, Estimates).
But, with the second quarter ending this month, companies offering advance looks at their business are uncovering disappointments.
Among the latest, telecom equipment maker Tellabs (TLAB: down $5.16 to $16.04, Research, Estimates) said it expects to break even for the quarter, compared to consensus forecasts for a profit of 29 cents per share.
Teradyne (TER: down $3.15 to $35.00, Research, Estimates), which makes semiconductor testing equipment, said it will lose money in the second quarter. Analysts expected a profit.
Jabil Circuit (JBL: down $1.25 to $23.86, Research, Estimates), a maker of computer equipment, warned that its earnings in the fourth quarter will miss forecasts.
Infineon Technologies, (IFX: down $4.45 to $25.40, Research, Estimates), a German chipmaker, said it would lose $510 million in its third quarter.
Click here for a look at the latest warnings.
"This is the time when we see what all these increasing inventories mean," Michael Farr, president of Farr Miller & Washington, told CNNfn's Before Hours.
The session's shift from early losses to slight gains recalled the action Tuesday, when stocks rallied at the start but sold off by day's end. This push-pull between hopes for economic recovery and disappointing profits has consumed the market for months
The S&P 500, among the broadest market indexes, reflects the tension. Up nearly 11 percent from its early April low, the index still is down 7.3 percent this year.
Optimists pin their hopes on the Federal Reserve. Another interest rate cut next Wednesday will take the target rate for overnight loans below 4 percent for the first time since 1994, a year the stock market began one of its best advances in history.
Financial stocks, whose business often improves as rates fall, rose Wednesday. Brokerage Bear Stearns (BSC: up $1.77 to $55.13, Research, Estimates) said second-quarter earnings fell to $1.18 a share, topping forecasts.
Lehman Brothers (LEH: up $3.40 to $75.90, Research, Estimates), which posted strong earnings Tuesday, gained along with Morgan Stanley (MWD: up $0.90 to $59.35, Research, Estimates), which reports its results Thursday.
One of the year's best performing stocks has to be H&R Block (HRB: down $0.07 to $62.73, Research, Estimates), up more than 50 percent in 2001. After the close of trading, the nation's biggest tax preparation company, posted a profit of $4 a share for the quarter that includes the April tax deadline, up 16 percent from a year earlier. 
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