Stocks end flat after early rally fades

The indexes end down more than 4% in August. Traders continue to be skeptical about the economy. Home prices rose in July, and consumer confidence gains slightly. Gold jumps above $1,250.

By Charley Blaine Aug 31, 2010 2:31PM

Charley BlaineUpdated at 6:45 p.m. ET

 

Stocks struggled all day but ended modestly lower as traders bid goodbye to a crummy month.


The Dow Jones industrials ($INDU) may have ended the day with a small gain, but it fell 4.3% for the month, its worst August loss since 2001. 

Bears probably looked gleefully at the prospects for a difficult September. The numbers alone are in their favor; the Dow has fallen in September in 21 of the last 32 years. If you were a bull, however, you could take cheer that the Dow finished the day above 10,000.


The Dow finished the day up 5 points to 10,015. The Standard & Poor's 500 Index ($INX) closed up less than half a point to 1,049. The Nasdaq Composite Index ($COMPX) finished down 6 points to 2,114.


The S&P 500 was off 4.7% for the month; the Nasdaq was down 6.2%. For the year, the Dow is down 4%, with the S&P 500 off 5.9% and the Nasdaq off 6.8%.


Volume continued to be light, and skepticism about the recovery remains high. The big worry for the market has been that the economic recovery is running out of gas. On Monday, a disappointing sell-off pushed  the Dow down 141 points. The selling continued around the world but stabilized once European markets opened.


You could see the skepticism in the price of gold, which jumped above $1,250 an ounce, with gold for December delivery settling at $1,250.30, up $11.20 from Monday. Gold's highest spot close was $1,257.20 on June 18. Gold gained 5.8% in August and is up 14.1% for the year.

Crude oil settled down $2.78, or 3.7%,  to $71.92, a victim of economic worry. Crude fell nearly 9% on the month and is down 9.4% for the year.

Interest rates were lower, with the 10-year Treasury yield falling to 2.477% from 2.545% on Monday. The dollar was mixed against major currencies.

The strength of the market will be tested Wednesday when the Institute for Supply Management issues its report on manufacturing in August and automakers report on August sales.

The former will likely get the most attention in part because manufacturing has been a strength in the recovery.

Manufacturing activity in the Chicago region expanded at a less-rapid pace in August. The Chicago purchasing managers index fell to 56.7% from 62.3% in July. The drop was in line with forecasts. But readings over 50% indicate overall business expansion.

This is a week with key economic reports nearly every day, finishing Friday with the August report on unemployment and nonfarm payrolls.

Lastly, Apple (AAPL) is expected to unveil a revamped version of its Apple TV service at a San Francisco event Wednesday. The service would include offerings of favorite TV shows and movies streamed over the Internet. Apple was up 0.3% o $243.20 today.

Energy prices -- New York close
 

Tues.

Mon.

Month chg.

YTD chg.
Crude oil 

$71.92

$74.70

-8.90%

-9.38%
(per barrel)











Heating oil

$2.0067

$2.0377

-3.90%

-5.15%
(per gallon)











Natural gas 

$3.8160

$3.8120

-22.49%

-31.51%
(per mil. BTU)











Unleaded gasoline

$1.9078

$1.9148

-12.49%

-9.52%
(per gallon)











Retail gasoline

$2.6770

$2.6780

-2.33%

1.44%
(per gallon; AAA)












Why the market didn't fall apart
After Monday's ugly sell-off, more selling today seemed likely.

In fact, stocks in Asia struggled because of concerns that a strengthening Japanese yen would cause Japan's economy to falter. The Nikkei 225 Index ($JP:N225) fell 3.6% to 8,825, its lowest close in 16 years.

 

Britain's FTSE Index ($GB:UKX) in London rose 0.4% to 5,225. Germany's DAX Index ($DE:DAX) was up 0.2% to 5,925.


While the market struggled for basically the entire day, bulls had weapons they could use to bid stocks higher. Most important were:

Better-than-expected consumer confidence. The Conference Board said its Consumer Confidence Index rose to 53 in August from 51 in July. It wasn't a wildly optimistic report, however, which probably kept the market in check.

Home prices in 20 major markets were higher in July. The S&P/Case Shiller Index was up 4.2% from a year ago. Partly, the price gain was due to tax credits designed to help home purchases. But Karl Case, the former Wellesley College economist who designed the index, told Bloomberg Radio that prices have been moving steadily higher for a year.

Homebuilding shares and bank stocks were all higher on the report. JPMorgan Chase (JPM) was the second-best performer of the 30 Dow stocks, up 1.4% to $36.36.

Fed worries about how to boost economy
Minutes from the Federal Reserve's Aug. 10 meeting highlighted some of the divisions among policymakers over what the Fed can and should do to boost the economy.

Interest rates are at record lows and the Fed itself can't cut rates any further. What's left to the Fed is the capacity to buy
Treasury securities to add cash to the banking system.  Several members of the Federal Open Market Committee, the Fed's rate-making body, worried that buying large amounts of securities might frighten financial markets -- and might not work.

They also feared that big purchases would make it harder for the Fed to raise rates when the economy finally turns higher.

Dell seen dropping 3Par bid
Dell (DELL) was expected to drop out of the bidding war to acquire 3Par (PAR), Reuters said, citing a survey of analysts and investors. Rival Hewlett-Packard (HPQ) raised its offer to $30 a share last week, giving Dell until Wednesday to reply. Dell shares fell 2.1% to $11.77, while 3Par's rose 0.9% to $32.12. HP shares were down 0.3% at $38.45.

 

Deere (DE) said it will sell its wind-energy business, Deere Renewables, to the electricity provider Exelon (EXC) for about $900 million. Deere shares was up 0.5% to $63.27. Exelon's were up 0.5% at $40.72.

 

Lions Gate Entertainment (LGF) jumped 10% to $7.14 after CNBC reported that billionaire investor Carl Icahn increased his offer for the company to $7.50 per share from $6.50 per share. The new offer expires on Oct. 22.


Saks (SKS) shares surged 19.7% to $7.90 after the U.K.'s Daily Mail said a private-equity buyout could be in the works for the retailer.

 

American International Group's (AIG) sale of its Taiwanese life insurance unit to Primus Financial Holdings was rejected by Taiwanese regulators. The Associated Press said Taiwanese regulators were concerned that Primus might be receiving funds from Chinese investors, which is against Taiwan law. AIG shares lost 0.2% at $33.93.

 

Discount retailer Dollar General (DG) said its fiscal-second-quarter profit increased 51% to $141.2 million, or 41 cents a share. Excluding one-time items, the company earned 42 cents, beating estimates for 38 cents. The company boosted its full-year earnings forecast to $1.68 to $1.74 a share from $1.62 to $1.69. The stock was down 0.3% at $27.31.

 

HSBC (HBC) said its $3.56 billion sale of its auto finance units in the U.S. to Banco Santander (STD) was completed. HSBC's American depositary receipts were up 0.4% to $49.20. Banco Santander's were up 0.8% to $11.69.


Seventeen of the 30 Dow stocks were higher today, led by A&T (T), up 1.5% to $27.03. A total of 43 stocks in the Nasdaq-100 Index ($NDX.X) were higher, led by Virgin Media (VMED), up 4.2% to $20.80. The laggards were chipmaker Broadcom (BRCM), down 6.4% to $29.96, and BlackBerry device maker Research In Motion (RIMM), down 6% to $42.84.


Research In Motion was downgraded by Sanford C. Bernstein, which said the company faces "a scary outlook" in the corporate market from new competition.

 

Material from The Street.com was included in this post.

Short hits from the markets -- New York close
 
  Tues.

Mon.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill

0.135%

0.130%

-3.57%

170.00%
5-year Treasury note 

1.342%

1.393%

-16.02%

-50.04%
10-year Treasury note

2.477%

2.545%

-14.79%

-35.55%
30-year Treasury bond

3.533%

3.602%

-11.16%

-23.87%
Currencies







 

 
U.S. Dollar Index

83.254

83.226

1.96%

6.44%
British pound

$1.5352

$1.5468

-2.16%

-5.10%
(in U.S. $)











U.S. $ in pounds

£0.6514

£0.6465

2.21%

5.37%
Euro in dollars

$1.2679

$1.2668

-2.88%

-11.54%
(in U.S. $)











U.S. $ in euros

€ 0.7887

€ 0.7894

2.96%

13.04%
U.S. $ in yen 

84.10

84.53

-2.94%

-9.57%
Canada dollar

$0.938

$0.944

-3.48%

-1.32%
(in U.S. $)











U.S. dollar 

$1.066

$1.059

3.68%

1.33%
(in Canadian $)











Commodities

 

 

 

 
Gold

$1,250.30

$1,239.20

5.81%

14.06%
(per troy ounce)











Copper

$3.3610

$3.4130

1.49%

0.43%
(per pound)











Silver

$19.3980

$19.038

7.75%

15.16%
(per troy ounce)











Wheat 

$6.5250

$6.7125

-5.88%

20.50%
(per bushel)











Corn

$4.2450

$4.2550

8.08%

2.41%
(per bushel)











Crude oil 

$71.92

$74.70

-8.90%

-9.38%
(per barrel)










 

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