Bank of America Worries Loom

US stocks popped into the green Thursday afternoon as traders used the psychologically significant level of 8,000 for the Dow Jones Industrial Average as an entry point, though investors still fretted about Bank of America’s capital needs.

The Dow Jones Industrial Average climbed 12.4 points (0.15%) to 8,212.5.

Shares of BofA were down by 18% at $8.38, off their low at $7.35 after a report that the largest US bank by assets could require government assistance to absorb losses from its Merrill Lynch acquisition. Shares of the bank pared their losses after a report that the US might guarantee $100bn to $200bn for BofA. Citigroup, which rushed into the sale of a controlling stake in its brokerage recently to raise capital, was off 19%.

The Dow hit its low for the session around 12:40 EST, off more than 200 points at 7,995, with the move marking its first intraday trek below 8,000 since Nov. 21. The Dow recorded its low of the current bear market on Nov. 20, when it closed at 7,552.

The Standard and Poor’s S&P500 increased 1.1 points (0.13%) to 843.7.

The financial sector remained the fulcrum of a volatile market, leading moves up and down.

From an earnings standpoint, JPMorgan shed 17 cents to $25.74 after posting a profit of 7 cents a share for the fourth quarter. Earnings fell 76% from a year ago and Chief Executive Jamie Dimon said loan demand “is dropping rather dramatically.”

Many veteran traders and analysts believe the market is likely to test its lows in the coming weeks, though there is some disagreement over whether the old lows will hold, considering the continuing flurry of fourth-quarter profit reports that are likely to contain more nasty surprises.

The Nasdaq rose 22.2 points (1.49%) to 1,511.8 though it was hurt by a 3% drop in Apple on worry about the health of CEO Steve Jobs. He had said late Wednesday he would take a medical leave from the company.

Commodity prices fell, hurting the energy and industrial sectors. As demand in economies worldwide seems to weaken with each data point, markets are pricing in a “deflationary” phase, where the prices of all assets decline, reducing incentive for investment and trade.

For Australian ADRs listed on the NYSE, BHP Billiton firmed $1.23 (3.19%) to US$39.78, Rio Tinto Plc added $3.42 (4.12%) to US$86.42, ResMed advanced 26 cents (0.68%) to US$38.36, Telstra Corporation improved 20 cents (1.67%) to US$12.20, Telecom Corporation of NZ dropped 18 cents (2.74%) to US$6.38 and Westpac climbed 14 cents (0.26%) to US$53.95.

In economic news, US producer prices fell last year for the first time since 2001, while the number of idled workers filing new claims for jobless benefits in the last week resumed an upward trend. One piece of news not as bad as feared, the Philly Fed’s index rose to -24.3 in January from -36.1 last month.

At 7:45 AM (AEDST), the 10-year Treasury note was yielding 2.20%. The five year note was yielding 1.36%.

European shares fell for the seventh session in a row on Thursday, as economic troubles pressured banks once more and prompted the European Central Bank to slash interest rates.

The pan-European Dow Jones Stoxx 600 index fell 0.9% to 191.17 in a choppy session, with banks the worst performers once more.

On Thursday, the European Central Bank lowered its key interest rate by 50 basis points to 2.0%, matching an all-time low.

In comments made after the rate decision, Trichet said the February meeting of the rate-setting Governing Council doesn’t mark an important date for policy makers, saying the next important policy meeting will come in March.

On a national level, the German DAX 30 index fell 1.9% to 4,336.73, the French CAC-40 index declined 1.8% to 2,995.88 while the UK FTSE 100 index closed down 1.4% at 4,121.11.

On Thursday, HSBC Holdings fell another 7%, while Barclays shares dropped another 8.2% and Deutsche Bank shares fell 6%.

Deutsche Postbank, another sharp decliner on Wednesday, plummeted 18.7% on Thursday. The lender was cut to underweight from neutral by a broker, which sees the revised terms announced on Wednesday for a Deutsche Bank stake as negative for shareholders.

Demonstrating the weakness of the economy, European new-passenger-car registrations fell 8% in 2008, the sharpest decline in 15 years, the European Automobile Manufacturers’ Association reported. Daimler shares declined 4.3% in the auto sector.

Analysts changed the ratings of several Europe auto firms, cutting Daimler and Fiat to hold from buy and cutting GKN, down 9.1%, and Scania, down 2.2%, to sell from hold.

On the FTSE 100, Rio Tinto climbed 21.00 pence (1.52%) to 1,401.00 pence and BHP Billiton lost 18.00 pence (1.56%) to 1,137.00 pence.

Asian shares crumbled under heavy selling pressure Thursday, with resource and financial stocks hit the hardest on a retreat in commodity prices and a tumble on Wall Street overnight.

Japan’s Nikkei 225 finished down 4.9% at 8,023.31 and China’s Shanghai Composite 0.5% lower at 1,920.21.

Hong Kong’s Hang Seng Index, which tumbled as much as 5.8% during the session, ended down 3.4% at 13,242.96.

New Zealand’s share market fell heavily again Thursday but fared better than most markets despite the government saying economic growth will be worse than previously outlined. The NZX-50 Index fell 1.6%, or 43.95 points, to 2,742.84.

Base metals on the London Metal Exchange were mixed, but ended the kerb session mostly lower Thursday and traders and analysts said technical indicators are going to dominate and create volatile sessions as the market searches for direction.

Base metals on the LME finished mixed. Aluminium fell $10 (0.67%) to $1,480 while copper rose $15 (0.46%) to $3,300 and nickel weakened $170 (1.59%) to $10,530. Zinc dropped $15 (1.19%) to $1,250 and lead remained unchanged at $1,130. Comex copper was last quoted at 143.85 US cents per pound.

Gold futures shed gains to end slightly lower, pressured by declining oil prices and a strengthening US dollar. Spot gold was last quoted at $815.65. Comex gold futures lost $1.50 (0.19%) to $807.30. Spot silver was last quoted at $10.55.

Crude fell again Thursday, approaching a five-year low as weak demand continued to force oil into storage, pushing up against capacity in some areas. West Texas Intermediate was last quoted at US$35.40 per barrel.

The euro lost its gains against the dollar and yen after bouncing earlier when the European Central Bank indicated it would be more cautious than the US Federal Reserve in cutting interest rates.