US stocks reversed big losses to end slightly higher on Thursday after ratings agency Standard & Poor’s (S&P) predicted that the end of subprime mortgage writedowns by top banks and financial firms is in sight.

The S&P 500 added 6.71 points, or 0.5%, to 1,315.48 after dropping as much as 2% earlier. The Dow Jones Industrial Average gained 35.50 points, or 0.3%, to 12,145.74. The Nasdaq Composite index rallied 19.74 points, or 0.9%, to 2,263.61. At one point the Dow was down 235 points.

Seven stocks rose for every three that fell on the New York Stock Exchange.

Nine of 10 industry groups in the S&P 500 advanced, after all 10 opened the day lower. Raw-materials producers gained the most, climbing 2% as a group.

All the major stock indices had tumbled in the morning after the potential default by a Carlyle Group bond fund added to the gloom across global financial markets, and an unexpected drop in retail sales heightened worries about a recession.

Gold’s spurt to US$1,000 an ounce sparked a rally in mining shares. Newmont Mining climbed to the highest since January.

Fannie Mae, the biggest provider of money for US mortgages, helped financial shares recover from a 4% decline after S&P said banks have already disclosed the majority of their writedowns.

The global financial-services sector may end up writing down the fair value of exposure to the subprime mortgages by US$285bn, mainly from residential mortgage-backed securities and more complex vehicles known as collateralized debt obligations (CDOs), S&P said. That is up from a previous estimate of US$265bn published earlier this year.

Carlyle Capital, a fund run by private-equity firm The Carlyle Group said late on Wednesday that it expects its creditors to seize all of the fund’s remaining assets after negotiations to prevent its liquidation failed.

The news sparked worries that the Amsterdam-based mortgage bond fund’s creditors will dump billions of dollars of mortgage-backed securities on the market, depressing their value even more. This sent the dollar lower versus the yen and other international markets lower.

Oil hit a record US$111 a barrel, gas an all-time high of 3.267 a gallon and gold prices surged past the US$1,000 an ounce mark. Helping fuel the run up in commodities was a further weakening of the dollar, which hit another all-time low versus the euro and a 12-year low against the yen.

Record oil, gas and gold prices have brought the spotlight back on inflation as investors wonder how the global economy will withstand an environment of higher pricing pressure and slowing growth.

In light of this focus, Friday’s CPI data in the US will be especially market-moving, particularly ahead of next week’s Federal Reserve policy meeting.