NEW YORK — Wall Street traded mostly higher today as investors were encouraged by another sharp drop in oil prices and snapped up shares of undervalued financial companies.

The market initially fell on heightened concerns about the continuing impact of the housing market's downturn that led to the credit crisis. However, a $4 drop in oil persuaded investors to wade back into equities — including downtrodden banks and brokerage.

Even Wachovia Corp., the nation's fourth-largest bank, shot higher after its stock tumbled to levels not seen since the early-1990s. The stock was pummeled after the retail bank posted an $8.9 billion loss because of charges and reserves for bad mortgage loans.

There's been so much focus on higher oil's impact on the economy that any notch lower breeds optimism that the commodities bubble might perhaps be nearing an end, analysts said. That means, for the moment, corporate earnings reports have lost some of their dominance of the market.

"There's been so many people speculating about oil taking off and how to handle it, the whole economy has been focused on it," said Todd Leone, managing director of equity trading at Cowen & Co. "Just the fact that it has dropped — a big move down — helps out. There's the perception that this will get the economy going again."

He acknowledged that there was no shortage of disappointing results at America's biggest companies — American Express Co., Apple Inc., and Texas Instruments Inc. all fell short of expectations. And Wachovia's miss was especially sobering for investors who last week sent stocks soaring after better-than-estimated reports from Citigroup Inc., JPMorgan Chase & Co. and Wells Fargo & Co.

Global banks and brokerages have written down some $300 billion of mortgage-backed securities and other risky investments since the crisis began last year. And Wall Street will get even more data on how badly the turmoil has hurt financial companies when Washington Mutual Inc. and E-Trade Financial Corp. post results after the closing bell in New York.

In early afternoon trading, the Dow Jones industrial average rose 21.90, or 0.19 percent, to 11,489.24. The blue chip index rose 400 points last week, but ended Monday's session slightly lower.

Broader indexes were narrowly lower. The Standard & Poor's 500 index edged down 0.90, or 0.07 percent, at 1,259.10; and the Nasdaq composite index dropped 8.39, or 0.37 percent, to 2,271.14.

Though the indexes were mixed, advancing issues outpaced decliners by a 3-to-2 basis on the New York Stock Exchange, where about 788.7 million shares exchanged hands.

The price of oil began the session mildly lower on expectations that Tropical Storm Dolly won't disrupt oil operations in the Gulf of Mexico. The advance increased after comments from a Federal Reserve official sent the dollar higher against major currencies, a trend that in turn sends commodities lower.

A barrel of light sweet crude tumbled $4.76 to $126.28 on the New York Mercantile Exchange.

Philadelphia Federal Reserve President Charles Plosser said there could be rate hikes "sooner rather than later" even if employment and financial conditions haven't revived. Higher rates also would make some government debt less attractive, and that sent Treasury bonds sharply lower.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 4.12 percent from 4.04 percent late Monday. Government debt also weakened as investors moved into equities.

Ryan Larson, senior equity trader at Voyageur Asset Management, said the "oil prices are alleviating some fears" triggered by a number of disappointing earnings reports. So far, the growth rate of Standard & Poor's 500 index companies reporting has fallen to negative 14.7 percent, according to Thomson Financial.

"Lower oil prices are diverting attention from earnings for the moment," said Ryan Larson, senior equity trader at Voyageur Asset Management. "There's no questions about some negative earnings reports coming out, but we're starting to think some of them might be company specific and not broader."

Investors will get more data with some 158 members of the S&P 500 expected to report this week, the busiest since second-quarter earnings season began in earnest earlier this month.

Earnings reports released in the past few days showed some indications that consumers — responsible for more than two-thirds of U.S. economic growth — are scaling back on purchases. American Express, whose credit cards cater to more affluent customers, missed projections after setting aside more money to cover souring loans across all its portfolios. Shares plunged $3.99, or 9.8 percent, to $36.90.

Technology stocks dropped after Apple, which makes iPods and iMac computers, beat expectations but issued weak guidance for the current quarter. Shares fell $13.03, or 7.9 percent, to $153.21. Texas Instruments fell $4.58, or 16.1 percent, to $23.94 after it missed expectations because of a slowdown in orders.

In other earnings news, UPS Inc., the world's largest shipping carrier, said profit fell nearly 21 percent in the second quarter despite a 6.7 percent increase in sales. The company also lowered its outlook for the year amid the slumping U.S. economy. The stock rose $1.99 cents, or 3.3 percent, to $61.43.

The Russell 2000 index of smaller companies rose 6.69, or 0.96 percent, to 704.32.

Japan's Nikkei stock average rose 2.98 percent. Britain's FTSE 100 fell 0.74 percent, Germany's DAX index rose 0.28 percent, and France's CAC-40 edged up less than 0.01 percent.