NEW YORK (AP) – Wall Street stumbled through another volatile session but ended with a respectable gain Thursday after a multibillion-dollar deal between Dow Chemical Co. and rival Rohm and Haas Co. helped offset concerns about the financial sector and energy costs.

Shares of mortgage finance companies Fannie Mae and Freddie Mac skidded lower on worries they will be forced to sell more new shares than anticipated to compensate for losses from the housing slump. Several retail banks and investment banks also dropped, particularly Lehman Brothers Holdings Inc.

The declines in financials came after Treasury Secretary Henry Paulson told Congress Wall Street can’t expect the government to bail out troubled financial companies.

“For market discipline to effectively constrain risk, financial institutions must be allowed to fail,” Paulson said.

Meanwhile, crude oil prices rebounded by more than $5 to more than $141 a barrel.

Though investors found a reason to buy after Dow Chemical’s $15 billion all-cash acquisition of the special chemicals maker Rohm and Haas, they are cautious ahead of quarterly earnings, in particular financial results due next week.

“Investors lack real clarity from the banks,” said Marc Pado, U.S. market strategist at Cantor Fitzgerald in New York. “It’s this uncertainty that keeps investors out of the market so what you get is a situation where you’re reacting to news. There are a lot of crosscurrents.”

The Dow Jones industrial average finished up 81.58, or 0.73 percent, at 11,229.02. Oil’s resurgence back above $141 a barrel briefly pulled the Dow into negative territory in afternoon trading.

Broader stock indicators also finished higher. The Standard & Poor’s 500 index gained 8.70, or 0.70 percent, to 1,253.39, while the Nasdaq composite index rose 22.96, or 1.03 percent, to 2,257.85.

Light, sweet crude for August delivery rose $5.60 to $141.65 a barrel on the New York Mercantile Exchange on another missile test by Iran and worries about more supply disruptions in Nigeria.

Bond prices ticked higher as stocks fluctuated. The yield on the benchmark 10-year Treasury note, which moves opposite to its price, slipped to 3.80 percent from 3.82 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices rose.

The biggest decliner among the 30 Dow companies was American International Group Inc, which tumbled $2.15, or 8.2 percent, to $23.99. On Wednesday night, credit ratings agency Moody’s Investors Service lowered its financial strength rating on AIG’s mortgage insurance subsidiary.

Freddie Mac fell $2.26, or 22 percent, to $8, and Fannie Mae fell $2.11, or 13.8 percent, to $13.20. Lehman fell $2.44, or 12.4 percent, to $17.30.

Shares of Wachovia Corp. also sank Thursday, after the bank named a new CEO Wednesday night. Wachovia fell $1.16, or 8.1 percent, to $13.13.

In economic data, the Labor Department said new applications for unemployment insurance fell by a seasonally adjusted 58,000 to 346,000 last week. But continuing claims rose, indicating lingering weakness in the labor market.

The number of people continuing to receive unemployment benefits jumped by 91,000 to 3.2 million for the week ending June 28, the most recent period for which that information is available. The gain leaves the filings at the highest level since late December 2003.

In corporate news, Wal-Mart Stores Inc. credited sales of groceries and tax rebate checks with giving a boost to June results, and it raised its forecast for the current quarter.

The world’s largest retailer said its same-store sales, or sales at stores open at least a year, rose 5.8 percent for the five weeks ended July 4. Including fuel, same-stores sales rose 6.4 percent. Analysts had expected a gain of 3.8 percent according to Thomson Financial. The stock fell 46 cents to $57.21.

Costco Wholesale Corp. dropped $1.29 to $70.86 although it reported that same-store sales rose 9 percent in June including sales of gasoline.

Discounters have been beneficiaries of consumers’ search for ways to help their strained household budgets. The health of the consumer is a concern for Wall Street, as consumer spending accounts for more than two-thirds of U.S. economic activity.

Advancing issues narrowly outnumbered decliners on the New York Stock Exchange. Consolidated volume came to 5.71 billion shares, up from 5.06 billion shares on Wednesday.

The Russell 2000 index of smaller companies rose 6.69, or 1.01 percent, to 670.44.

Overseas, Japan’s Nikkei stock average rose 0.12 percent. Britain’s FTSE 100 fell 2.22 percent, Germany’s DAX index declined 1.28 percent, and France’s CAC-40 fell 2.49 percent.

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