LONDON (ShareCast) - Wall Street staged a startling recovery in the afternoon, led by financial stocks, which traditionally do well in a period of interest rate cuts. The recovery quickly gained momentum with the result that a 300 fall on the Dow this morning was turned into a rise of almost equal proportions by the close.

At the close the Dow-Jones 30 was up 298 points at 12,270, while the broader based S&P 500 rose 28 to 1,338. The tech-laden NASDAQ Composite lagged behind the other indices but still managed a 24 point rise to 2,316.

Bond insurers topped the leaderboard following a meeting between New York State regulators and bank representatives to discuss ways of shoring up bond insurers. Ambac, which had its AAA insurance rating downgraded by Fitch Ratings last week, and sector leader MBIA stormed higher, with the former rising by teo-thirds while the latter rose by about one-third.

Housebuilders were also buoyed by the interest rate outlook. Pulte Homes, Centex and D R Horton enjoyed their second successive day of strong gains.

Banks had been doing well even when the market was in freefall in the morning, and the afternoon saw gains extended. Bank of America, Wachovia and KeyCorp were all sharply higher on further consideration of yesterday’s results, with Wachovia the pick of the bunch. However, E-trade, JP Morgan and Bear Stearns were the best performers among banks and brokerages.

The biggest casualty among leading shares in the morning was MGIC Investment, the biggest of the mortgage insurers in the US. MGIC said delinquent loans on its books rose 18% in the fourth quarter of 2007. However, the stock was carried along on the wave of optimism in the afternoon and finished the day little changed.

United Technologies, which makes Otis lifts, Pratt & Whitney engines and Sikorsky helicopters, had a good fourth quarter. Fourth quarter profit jumped 23% on the back of strong international demand for aircraft parts and lifts.

Tech stocks did less well in the wake of Apple’s results after the close of trading yesterday. The computer and iPod maker set the tone in the morning by warning that it expects a slow-down in sales and profits in the second quarter. Apple’s share price was sliced, despite first quarter earnings coming in ahead of expectations.

One of the victims of Apple’s success appears to be phone maker Motorola, which slipped after disappointing with an 84% fall in earnings in the fourth quarter. The company’s mobile phone line is facing serious competition in the form of Apple’s iPhone while the company also warned recovery in its handsets will take longer than expected.

Network specialist Ciena was caned after announcing yesterday it has agreed to buy privately owned rival World Wide Packets.

Wireless communications technology company Qualcomm reported pro-forma earnings per share of 52 cents for its first quarter and reaffirmed its pro-forma earnings forecast for 2008 of $2.01 to $2.07 a share.

Shares in internet auction company eBay climbed higher after it said net income in the final three months of 2007 rose to $530.9m, or 39 cents a share, from $346.5m (25 cents) in the corresponding period of 2006. The company also confirmed that chief executive Meg Whitman will be stepping down to be succeeded by John Donahoe, currently president of eBay marketplaces.

Copper miner Freeport-McMoRan’s share price plunged after the company announced a 2.8% decline in fourth quarter earnings, due to increased costs related to its purchase of Phelps Dodge.

Student loan provider SLM - better known as “Sallie Mae” - plunged into the red in the fourth quarter. The company announced a net loss of $1.64bn after making massive provisions for defaulting loans.

Pfizer, the world’s largest drugs company said fourth-quarter net income tumbled 70% to $2.9 billion, reflecting the recent sale of its consumer unit to Johnson & Johnson. Income per share was 42 cents a share, though this was boosted to 52 cents a share after the exclusion of some exceptional items; a figure which beat analysts’ estimates of 47 cents a share.

Berkshire Hathaway, the investment vehicle run by the “sage of Omaha”, Warren Buffet, bought a 3% stake in the world's biggest reinsurer, Swiss Re. Under the terms of the sale Berkshire Hathaway will assume 20% of Swiss Re’s property and casualty business for the next five years.

Higher energy prices and a deferred Canadian tax benefit boosted ConocoPhillips’s fourth quarter net income. The oil company’s net income in the fourth quarter of was $4.37bn, compared with $3.2bn in the final quarter of 2006. Net income per share rose to $2.71 from $1.91, and exceeded analysts’ expectations of a figure around $2.40.

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