Wall Street rebounded from yesterday's losses after Circuit City Stores Inc. reported its earnings jumped 65 percent. The electronic retailer's news, coming off an upbeat earnings report from Alcoa Inc. early in the week, reassured investors nervous about rising commodity prices and their impact on corporate profits.

In economic news, America's trade deficit narrowed in February, as the imbalance with China dropped to the lowest level in nearly a year. But the overall deficit was still the third highest on record. The deficit for the first two months of this year is running 13.5 percent above the pace in early 2005, a year when the U.S. deficit hit an all-time high of $723.6 billion.

The Commerce Department reported today that the deficit fell to $65.7 billion, a 4.2 percent decline from January's record imbalance of $68.7 billion.

"We have a minor stabilization of the market after a couple of slightly softer days," said Stuart Schweitzer, global markets strategist at JPMorgan Asset & Wealth Management. "No big surprise."

The Dow Jones industrial average rose 40.34, or 0.36 percent, to 11,129.97.

Broader stock indicators also closed higher. The Standard & Poor's 500 index rose 1.55, or 0.12 percent, to 1,288.12, and the Nasdaq composite index rose 4.33, or 0.19 percent, to 2,314.68.

The market seems to be moving in a pattern similar to recent earnings seasons, in which the market rises with high expectations for earnings before companies begin to announce, then enters a pullback or a lull as earnings season begins, said Richard E. Cripps, chief market strategist for chief market strategist for Stifel Nicolaus, a broker based in St. Louis.

Investors were also watching events overseas; nervousness about Iran's nuclear capabilities contributed to Wall Street's decline yesterday, when the Dow fell more than 51 points.

There were further signs the housing market is slowing, which some investors view as a sign that Federal Reserve rate hikes are cooling down the economy. The Mortgage Bankers Association's weekly home purchase index decreased by 4.7 percent and the refinance index dropped by 6.6 percent.

Bonds fell, with the yield on the 10-year Treasury note at 4.98 percent, down from 4.93 percent late yesterday. The U.S. dollar was mixed against other major currencies. Gold prices were higher.

Crude oil futures fell. A barrel of light crude settled at $68.62, down 36 cents, in trading on the New York Mercantile Exchange.

Circuit City rose $2.04, or 8.3 percent, to $26.65 after its fourth-quarter earnings soared on strong sales and improved supply management. Earnings from Circuit City, the nation's No. 2 chain of consumer electronics stores behind Best Buy Co. Inc., were $146.6 million, or 84 cents per share, beating analysts' estimates of 84 cents a share.

Alcoa, which reported earnings after the close of trading Monday, was unchanged at $34.09.

Bausch & Lomb shares fell $3.42 to $45.61 shedding another 7 percent, after the eye care products company said the source of an increase in fungal infections linked to one of its lens solutions Monday remains a mystery and retailers continued to pull the products from their shelves.

Gannett Co., the largest newspaper publisher in the country, fell $1.06 to $57.76 after it reported an 11.5 percent decline in profit as the company began expensing stock options and recording costs from its new newspaper partnership in Detroit.

Advancing issues narrowly outnumbered decliners on The New York Stock Exchange, where volume came to 1.40 billion shares, down from 1.59 billion at the same time yesterday.

The Russell 2000 index of smaller companies rose 5.66, or 0.76 percent, to 747.77.

Overseas, Japan's Nikkei stock average fell 1.47 percent. Britain's FTSE 100 dropped 0.26 percent, Germany's DAX index fell 0.12 percent, and France's CAC-40 lost 0.54 percent.