Stocks reversed early losses to trade modestly higher Tuesday, as investors monitored the movements of record-high oil prices but still laid bets that the economy and companies are in recovery mode.Crude oil climbed past $122 a barrel on the New York Mercantile Exchange as traders, who have nearly doubled the price of oil over the past year, reacted to the weakening U.S. dollar, supply threats, and a note from Goldman Sachs predicting that oil could reach $200 a barrel. High oil prices threaten to crimp consumers' discretionary spending. But by midday the stock market pared its morning losses, as oil price sticker-shock waned and as investors looked past wider-than-expected quarterly losses at Swiss bank UBS, government-sponsored mortgage company Fannie Mae and homebuilder D.R. Horton Inc.



Ryan Detrick, senior technical strategist at Schaeffer's Investment Research, said it is a good sign that stock traders started buying back in again when the Standard & Poor's briefly dipped below the technically significant 1,400 mark.

"We had some negative news this morning, and we've shaken it off. It's encouraging," Detrick said.

In recent weeks, stronger-than-expected results from companies outside the battered financial and housing sectors helped the stock market rebound to levels not seen since early January. Tuesday's gains were modest, however, as Wall Street awaits quarterly results from computer networking equipment maker Cisco Systems Inc. after the market closes.

"I think overall, the strength in stocks right now is on fairly firm footing," said JPMorgan equities analyst Thomas J. Lee. He said there's still plenty to worry about, notably high oil prices and the weak housing market. But economic data has been better than expected — particularly Friday's employment report and Monday's data on the service sector — and meanwhile, the credit markets keep showing increased appetite for risk.

"In some ways, first-quarter earnings are yesterday's news," Lee said.

In midafternoon trading, the Dow Jones industrial average rose 25.73, or 0.20 percent, to 12,995.27.

Broader stock indicators also rebounded. The S&P 500 index rose 7.31, or 0.52 percent, to 1,414.80, and the Nasdaq composite index rose 12.94, or 0.53 percent, to 2,477.06.

Bond prices pared earlier gains. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was at 3.87 percent, the same as late Monday.

Huge quarterly losses from three major players in the financial and homebuilding industries initially sparked some stock selling Tuesday, but those dips were soon met by bargain-hunters, who are betting that those sectors are a good buy right now given their low prices.

Fannie Mae reported a larger-than-expected first-quarter loss of $2.2 billion, and said it plans to lower its dividend and raise $6 billion in additional capital. But it also estimated its market share increased to about 50 percent of the new single-family mortage related securities issued. Fannie Mae shares rebounded to rise $1.34, or 4.8 percent, to $29.64.

Homebuilder D.R. Horton reported a quarterly loss of $1.3 billion and halved its dividend to 7.5 cents a share. The homebuilder's shares rose 34 cents, or 2 percent, to $16.30.

UBS reported a loss of nearly $11 billion and said it is reducing its work force by about 7 percent. UBS shares dipped 50 cents to $33.80.

Meanwhile, Wachovia Corp. said it is nearly doubling its previously reported loss for the first quarter to $708 million after reviewing its portfolio of bank-owned life insurance. Wachovia's stock dipped a penny to $29.77.

Gold climbed, while the dollar fell against most other major global currencies.

The Russell 2000 index of smaller companies rose 2.63, or 0.36 percent, to 726.98.

Advancing issues outnumbered decliners by about 8 to 7 on the New York Stock Exchange, where volume amounted to a light 783.9 million shares.

Overseas, Japan's stock market was closed for a holiday. In Europe, Britain's FTSE index finished flat, Germany's DAX index fell 0.50 percent, and France's CAC-40 fell 0.44 percent.

Cisco Systems and Walt Disney Co., one of the 30 companies that make up the Dow, are scheduled to release quarterly results after the market closed Tuesday. Cisco's CEO, John Chambers, was one of the first executives to warn back in November that weakening demand from cash-strapped financial services companies could hamper growth in the tech arena.

Cisco fell 21 cents to $26.07 ahead of its earnings, while Disney rose 10 cents to $33.39.

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