March 6, 2007 > Stocks rebound fitfully
Stocks rebound fitfully
By Tim Paradis
NEW YORK (AP), Feb 28 _ Wall Street rebounded fitfully Wednesday from the previous session's 416-point plunge in the Dow industrials as investors took comfort from comments by Federal Reserve Chairman Ben Bernanke but still showed signs of unease about the economy.
Bernanke's remarks to Congress that he still expects moderate economic growth gave some investors confidence to look for bargains. A recovery in some overseas markets following a worldwide selloff Tuesday also lent some support to U.S stocks, but the advance lacked some conviction _ the major indexes fluctuated throughout the day, with the Dow rising as much as 137 points before pulling back and advancing again several times.
The Fed chairman allayed some of the fears about a slowdown in the U.S. and Chinese economies that fed Tuesday's drop; remarks earlier in the week from former Fed Chairman Alan Greenspan warning that a U.S. recession could take hold later this year contributed to Tuesday's declines.
Investors parsed a series of economic reports out Wednesday, hoping to glean a sense of where stocks were headed. Bernanke's comments and a gross domestic product reading that mostly met expectations helped bring out some buyers. Nevertheless, investors remained cautious and didn't rush headlong into stocks and discount the possibility of a further shakeout.
``It's typical that you get a bounceback the next day,'' said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co. ``Now we're essentially flat on the year. Can we go up from here or down? That sorting-out process will continue now.''
A recovery in China's Shanghai Composite Index, which had fallen nearly 9 percent Tuesday, also helped boost U.S. stocks, although other Asian markets and European exchanges saw declines of more than 1 percent.
Amid another heavy-volume day led the New York Stock Exchange to instruct specialists to keep their order books open longer than normal to catch any trades that might still be filtering through the system.
The Dow Jones industrials rose 52.39, or 0.43 percent, to 12,268.63.
Broader stock indicators also managed gains. The Standard & Poor's 500 index climbed 7.78, or 0.56 percent, to 1,406.82, and the Nasdaq composite index rose 8.27, or 0.34 percent, to 2,416.13.
Tuesday's decline, which was the largest point drop in the Dow industrials in more than five years, made February an unwelcome month for the 30-stock index. It marked the Dow's worst monthly percentage drop since April 2005 and the worst monthly point decline since December of 2002.
For the S&P, February was the worst point and percentage decline since May last year. And for Nasdaq, the month marked the worst percentage and point decline since July.
Bonds fell Wednesday as stocks tried to recoup some losses. The yield on the benchmark 10-year Treasury note rose to 4.56 percent from its low for the year of 4.47 percent late Tuesday.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude settled rose 33 cents to $61.79 a barrel on the New York Mercantile Exchange as investors brushed off concerns about falling demand from China.
The market took some solace from the Commerce Department report that the U.S. economy grew at an annual rate of 2.2 percent in the fourth quarter. The gross domestic product reading was slightly below expectations, but wasn't as weak as some investors had feared. The figure was more than a percentage point below the initial estimate of 3.5 percent made a month ago.
In other economic news, the National Association of Purchasing Management-Chicago index of business conditions in the Midwest showed a weaker-than-expected reading. The February figure fell to 47.9 from 48.8 in January. The report is often viewed as a bellwether for the Institute for Supply Management's index of manufacturing activity for February, which is due Thursday.
Also, a Commerce Department report found new-home sales fell by 16.6 percent in January from the previous month, the largest drop in 13 years.
``I thought on Monday and I think even more today that the stock market offers good value and that it will move higher for the year,'' said Ed Keon, chief investment strategist at Prudential Equity Group.
While some observers had warned that stocks had grown overvalued after the strong gains logged in 2006, Tuesday's pullback nonetheless came as a surprise on Wall Street, which had gone 45 months without a decline of more than 2 percent in single session.
In the bumpy trading that occurred Wednesday, particularly as fresh economic data emerged, investors appeared to be still calculating the ramifications of Tuesday's losses, which erased $632 billion in shareholder equity, according to Standard & Poor's.
In corporate news, Merck & Co. regained some ground after the drugmaker issued a first-quarter profit forecast that surpassed estimates of Wall Street analysts and raised its profit target for the year. The company rose 97 cents, or 2.3 percent, to $44.15.
Fremont General Corp. fell $2.84, or 24.4 percent, to $8.81 after the mortgage lender warned it would delay the release of its fourth-quarter report, which had been set for Wednesday. The company also plans to delay filing its annual report.
Most U.S.-listed Chinese companies recovered at least some of their huge losses from Tuesday. Internet company Baidu.com Inc. rose $1.94 to $106.70, while China Mobile Ltd. advanced $2.21, or 5 percent, to $46.37.
Sprint Nextel Corp. rose 85 cents, or 4.6 percent, to $19.30 after the nation's third largest wireless carrier said fourth-quarter profit rose 33 percent on stronger revenue.
While many sectors saw buyers sniffing for deals, homebuilders saw additional selling, due in large part to the Commerce Department report that new-home sales plunged in January by the largest amount in 13 years.
Toll Brothers Inc. fell 72 cents, or 2.4 percent, to $29.86, while KB Home fell 56 cents to $49.53.
Advancing issues outpaced decliners by about 2 to 1 on the New York Stock Exchange, where volume was a heavy 2.25 billion shares. Volume was lighter than the 2.38 billion seen at the same point Tuesday, however.
The Russell 2000 index of smaller companies rose 0.64, or 0.08 percent, to 793.30.