Wall St. edges higher; Europe anxiety remains (Reuters)

NEW YORK (Reuters) – Stocks ended with modest gains on Thursday, shifting back and forth on incremental developments in Europe where leaders sought to reassure investors that a solution to the debt crisis would come soon.

The S&P has alternated gains and losses for seven days at the close and has kept to a tight range as markets watch for the latest news out of Europe.

Germany and France released a statement on Thursday saying leaders would now hold two summits to discuss the debt crisis, with a solution in place by Wednesday's second meeting.

"The statement was enough for us to come off the lows, but there is still a long way to go," said Robert Pavlik, chief market strategist at Banyan Partners LLC in New York.

Market anxiety remained elevated. The CBOE Volatility Index VIX (.VIX), Wall Street's "fear gauge," rose more than 1 percent to near 35, extending gains after rising nearly 10 percent on Wednesday.

Supporting the market, U.S. economic data showed factory activity in the U.S. Mid-Atlantic region rebounded in October while a separate report showed U.S. jobless claims fell last week.

On the negative side, other data showed a drop in sales of existing-homes last month and only a small rise in a gauge of future growth.

Financial and materials stocks were the day's top gainers. The S&P 500 financial sector index (.GSPF) rose 1.8 percent and materials (.GSPM) climbed 1 percent.

The Dow Jones industrial average (.DJI) ended up 37.16 points, or 0.32 percent, at 11,541.78. The Standard & Poor's 500 Index (.SPX) was up 5.51 points, or 0.46 percent, at 1,215.39. The Nasdaq Composite Index (.IXIC) was down 5.42 points, or 0.21 percent, at 2,598.62.

Progress by EU leaders toward a solution is considered vital for Wall Street stocks to break out of their trading range.

The S&P 500 has struggled after reaching the top end of a two-month trading range at around the 1,230-1,250 level.

Investors are also closely watching the developing U.S. earnings season. According to Thomson Reuters data, of the 109 companies in the S&P 500 that have reported earnings, 70 percent have topped analysts' expectations.

After the closing bell, Microsoft shares (MSFT.O) fell 0.5 percent to $26.87 following quarterly results. During regular trading Microsoft finished at $27.04, down 0.3 percent.

Ingersoll Rand Plc (IR.N) posted lower quarterly earnings, and its fourth-quarter profit forecast fell short of some Wall Street estimates, due to depressed housing and consumer markets, sending shares down 7.9 percent to $27.38.

Polycom Inc (PLCM.O) fell more than 25 percent to $16.33 and weighed on the Nasdaq after the videoconferencing company reported quarterly revenue well below market expectations. The NYSEArca networking index (.NWX) lost 1.8 percent.

Trading volume was about 7.8 billion shares on the New York Stock Exchange, NYSE Amex and Nasdaq, below this year's daily average of about 8 billion.

On the NYSE, advancers beat decliners by a ratio of three to two, while on the Nasdaq, decliners beat advancers by a ratio of 12 to 11.

(Reporting by Angela Moon, Editing by Kenneth Barry)

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Capital One posts 3rd-qtr profit edges up 1 pct (AP)

NEW YORK – Capital One Financial Corp. on Thursday said its third-quarter profit edged up 1 percent, as it wrote more auto and commercial loans and defaults eased.

A spike in marketing and operating expenses and an increase in a reserve set aside to handle claims against the bank related to soured mortgages tempered the gains.

The McLean, Va.-based bank had net income for the quarter ended Sept. 30 of $813 million, or $1.77 per share, compared with $803 million, or $1.76 per share, in the year-ago period.

Total revenue rose 3 percent to $4.15 billion, from $4.02 billion last year.

Analysts, on average, were expecting profit of $1.68 per share on revenue of $4.04 billion, according to data provided by FactSet.

Net interest income, or money earned from deposits and loans, rose 6 percent to $3.28 billion, from $3.11 billion a year ago. Total deposits jumped nearly 8 percent to $128.32 billion. Total loans gained 3 percent to $129.95 billion.

"Overall, I think the results were pretty good," said Keefe, Bruyette & Woods analyst Sanjay Sakhrani.

The bank, best known for its ubiquitous "What's in your wallet?" advertising campaign, said U.S. credit card use rose 17 percent from the prior-year quarter. Sakhrani said the increased usage was "very strong."

Its auto finance unit wrote 40 percent more loans than last year, bringing total loans in this segment to $20.42 billion. Commercial loans also increased, rising 9 percent to $32.11 billion. CEO Richard Fairbank said during a conference call to discuss results that the growth in commercial loan commitments, which indicates future loan growth, was "even stronger."

"We believe the period of shrinking loans through the Great Recession has come to an end," Fairbank said.

Capital One wrote off $812 million in uncollectible loans, a drop of 47 percent from last year. That enabled the bank to reduce the amount it set aside to cover soured loans by 28 percent, to $622 million.

Fairbank said improvements in the performance of the bank's credit card and auto loans "have outpaced the modest and fragile economic recovery." The bank has been monitoring its outstanding credit in search of signs that recent economic difficulties will lead to another round of worsening payment performance, but said so far "we have yet to see any evidence of this."

The gains in lending were partially offset by higher marketing and operating expenses, which rose 15 percent.

Capital One also said it increased its reserve for mortgage-related claims by 3 percent to $892 million. The bank said it now believes the upper end of potential losses from such claims, which stem from mortgages that were used to back investment vehicles that have since soured, could be $1.5 billion.

The company said the pending acquisition of HSBC's U.S. credit card portfolio should close by the end of the year, pending regulatory approval. It is also still waiting for regulators to OK its purchase of ING Direct.

Capital One shares added 74 cents, or 2 percent, to close Thursday trading at $40.49. Shares rose 11 cents to $40.60 in aftermarket trading.

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