Dow off 40 as stocks stage big rebound
Bargain-hunting boosts shares after investor worries about European financial woes drive markets lower. Retailers see a strong weekend of holiday sales.
U.S. stocks finished lower today, but they recovered well more than half of their worst losses of the day as at least some investors seized the chance to pick up good buys.
Earlier, stocks had slumped to their lowest levels since mid-October on worries that Europe's debt crisis would spread well beyond Ireland.
The fears set off a rally in the U.S. dollar and pushed U.S. interest rates lower. Multinational stocks such as IBM (IBM), Caterpillar (CAT) and 3M (MMM) were also hit.
And then the ship righted itself. The Dow Jones industrials ($INDU) ended the day down 40 points to 11,052, but they enjoyed a huge comeback from a decline of as many as 163 points at 10 a.m. ET.
The Standard & Poor's 500 Index ($INX) was off 2 points to 1,188. It was briefly up 3 points at 3:45 p.m. and had been off as many as 16 points in the morning. The Nasdaq Composite Index ($COMPX) dropped 9 points to 2,525 after tumbling as many as 38 points in the morning.
The market's third loss in the last four sessions and an overall decline since right after the midterm elections raise the possibility that stocks have peaked for the year.
The Nasdaq is off 2.1% from a Nov. 5 peak. The Dow and S&P 500 are down 3.4% and 3.1%, respectively, since peaking on Nov. 4. The S&P 500 briefly fell below its 50-day moving average for the first time since September; the Dow closed below its 50-day moving average for the first time since Aug. 31. Both are bearish signals, although no guarantee of what to expect.
However, the Dow's recovery from a 163-point loss suggests a lot of built-up optimism.
It was not clear what triggered the buying. We'll offer three reasons:
Short-sellers took profits or were forced to cover their positions when the market turned. That requires them to buy back shares they'd borrowed and sold earlier. That reinforces the idea of resilience. Result, as Barry Ritholtz noted on The Big Picture blog: "This is a very tough market to be short in."
The S&P 500 turned when it hit 1,174. That's been an important support level. A drop to that level has triggered buying for the last month.
A rally in the U.S. dollar faded. The U.S. Dollar Index was up 0.452 to 80.885 at 4:10 p.m., but it had peaked at 81,215. As the dollar slipped back, shares of multinational stocks moved higher.
A big day is ahead
Tuesday is a big day for markets, starting with the end of trading for November.
With today's close, the Dow is looking at a decline of 0.6% for the month after two straight monthly gains.
The S&P 500 and the Nasdaq are up 0.4% and 0.7%, respectively -- looking, potentially, at their third monthly gains in a row.
At the same time, there are three important economic reports: the S&P/Case-Shiller home-price index for September and the Chicago Purchasing Managers Index and Consumer Confidence Index, both for October.
Earnings are due from Barnes & Noble (BKS) and the National Bank of Canada (NTIOF). The bank is expected to announce a dividend increase and may set up dividend increases next year for Canada's largest banks, the Royal Bank of Canada (RY) and Toronto-Dominion Bank (TD).
Futures trading suggests a modestly lower open for U.S stocks. Most Asian and Pacific markets were lower.
|Energy prices -- New York close|
|Mon.||Fri.||Month chg.||YTD chg.|
|(per mil. BTU)|
|(per gallon; AAA)|
Markets boo Irish debt deal
The trigger for the initial sell-off was investor unhappiness with the European Union's $113 billion agreement to bail out Ireland and its tottering banks.
While the initial market reaction -- at least until European stock markets opened -- was positive, the good feelings quickly melted away. The concern was that the crisis will move on to the next weak links in Europe: Portugal and Spain. And there are even worries that Germany's financial position could be at risk.
About €50 billion ($66 billion) are aimed at bolstering Ireland’s public finances while it implements a €15 billion ($20 billion) spending-cut package. Of the rest, €10 billion will recapitalize Ireland’s stricken banks, while another €25 billion ($33 billion) will be a contingency fund to help support the banking system if necessary, the Financial Times said.
As a result, Britain's FTSE-100 Index ($GB:UKX) was off 2.1% to 5,550. Germany's Dax Index ($DE:DAX) was down 2.2% to 6,698.
Crude oil settled up $1.97 to $85.73. Gold settled $3.60 higher to $1,366 in New York. Interest rates were lower, with the 10-year Treasury yield falling to 2.822% from 2.864% on Friday. The dollar was higher against major currencies. The U.S. Dollar Index was up 0.74% to $81.025.
If you want good news from the day's trading, there are two things to mention:
- The National Retail Federation said U.S. shoppers spent 6.4% more than last year over the holiday weekend. Retail stocks, however, were lower.
- Manufacturing indexes from the Dallas and Chicago Federal Reserve banks both showed gains in October. The Chicago Fed's manufacturing index was up 0.7%, its second monthly gain in a row. The Dallas Fed's jobs expectations index, which looks six months ahead, surged to 37.9 from 13 in October.
Still, the selling was broad, although the volume appeared not to be heavy. Eleven of the 30 Dow stock were higher, led by American Express (AXP), up 2.5% to $43.33; Bank of America (BAC), up 1.7% to $11.31; and DuPont (DD), up 1.3% to $46.92.
Twenty-four Nasdaq-100 ($NDX.X) stocks were higher, led by Amazon.com (AMZN), up 1.3% $179.49 on the expectation for strong sales today on Cyber Monday and for the holiday season. The index, which tracks the largest Nasdaq stocks, was off 5 points to 2,149, after falling as many as 35 points earlier in the session.
Apple (AAPL), which represents 20% of the market capitalization of the Nasdaq-100, recovered to $316.87, up 0.6%.
FedEx (FDX) bucked the selling pressure, rising 4.7% to $91.59. Credit Suisse raised its rating on the package-shipping company was raised to "outperform" from "neutral," saying the company should benefit from a rebound in global industrial production. Credit Suisse also lifted its 12-month target price on the stock to $111 from $98.
Seven of the 10 sectors of the S&P 500 were lower, but materials, financial and energy shares pushed into the black on the day. The S&P Select Financial SPDR exchange-traded fund (XLF) was up 0.8% to $14.54. Regions Financial (RF) was up 2.3% to $5.37. The gain was the third-largest among S&P 500 stocks. JPMorgan Chase (JPM) added 1.1% to $37.91.
Wells Fargo (WFC) rose 2.1% to $27.20. The company is expected to be one of the first major banks allowed to restore dividends after sharing capital plans with the Federal Reserve, according to an analyst.
Hewlett-Packard (HPQ) was the Dow's laggard, down 1.4% to $42.60, after a Gartner report said tablet sales are likely to cut into demand for personal computers.
Starbucks (SBUX) fell 1.1% to $30.79 as Kraft Foods (KFT) initiated an arbitration proceeding to challenge the coffee company's attempt to break their packaged-coffee agreement. Kraft shares fell 0.4% to $30.19.
Shares of Johnson & Johnson (JNJ) were down 0.6% at $61.91 after it was ordered to pay Basilea Pharmaceutica $130 million for breaching a licensing agreement.
Royal Dutch Shell (RDS.A) put its South Texas gas fields up for sale, The Wall Street Journal said. Royal Dutch Shell shares in New York were off 1.3% to $61.40.
Material from the Street.com was incorporated into this post.
|Short hits from the markets -- New York close|
|Mon.||Fri.||Month chg.||YTD chg.|
|13-week Treasury bill||0.16%||0.14%||33.33%||220.00%|
|5-year Treasury note||1.50%||1.53%||26.97%||-44.27%|
|10-year Treasury note||2.82%||2.86%||8.04%||-26.57%|
|30-year Treasury bond||4.15%||4.21%||3.70%||-10.62%|
|U.S. Dollar Index||80.902||80.433||4.45%||3.43%|
|(in U.S. $)|
|U.S. $ in pounds||£0.64||£0.64||3.03%||3.82%|
|Euro in dollars||$1.31||$1.33||-6.00%||-8.43%|
|(in U.S. $)|
|U.S. $ in euros||€ 0.76||€ 0.75||6.38%||9.20%|
|U.S. $ in yen||84.39||84.07||4.30%||-9.26%|
|U.S. $ in Chinese||6.69||6.67||-0.11%||-2.03%|
|(in U.S. $)|
|(in Canadian $)|
|(per troy ounce)|
|(per troy ounce)|
The stock market recovered from its lows not because of "bargain hunters" but because today was a double Permanent Open Market Operations day in which $9 Billion in Federal Reserve printed money was given to the Primary dealers. Or in other words $9 billion of debt was monetized by the Fed today and this is money used by the primary dealers to levitate stocks to a near green close. This is all part of the Quantitative Easing plan to keep the stock market from achieving its actual value in my opinion. With insiders exiting at multiples of hundreds to
Dow 100 by 12/1/2010
S&P 1 by 12/1/2010
Nasdaq 5 by 12/1/2010
The total financial collapse of the world is here. Buffett and Gates on the bread likes. Soros eating orange peels off the street.
Sorry, just wanted to talk like a few of the idiots who are on this blog constantly AND who are always wrong.
Stock market is up for the year, unemployment is slightly down and companies are hiring again. The recession is over, the recession is over! Happy days and good times are here again!
Now those are the ultimate idiots and imbeciles with their blinders always on and the ones that are "WRONG" 100% of the time.
hang seng is down 300 points as of now and if they having a bad day tuesday looks bad for the dow! wonder how they spin that b.s. they could use N.K. as the market killer!
By 'investors' does he really mean 'computer trading algorithms'? The stock market ups and downs are presently managed by most of the large trading houses and their sophisticated 'AI' trading stocks at lightning speed and in large amounts to ensure the trading house makes lots of fake money.
I doubt many 'Human' traders had much to do with the market volume or swing, either direction.
Nothing is going to change either as long as we keep allowing the fox (Goldman Sachs) guard the henhouse.
1 little, 2 little, 3 little idiots... 4 little, 5 little, 6 little idiots... 7 little, 8 little, 9 little idiots... ten little idiot PUBS!
I disagree with you. I don't know who is predicting that the DOW will fall as much as you put in your post. I understand you are being sarcastic.
Are you really not concerned about the sovereign debt issue?
I continue to buy GLD, SLV, PRPFX
bucket trading is on again.....with help of fed reserve to back up the loses
The rebound , it should not have dropped in the first place as I said before. Manipulation of the market is a gain for somebody, but as a whole it just plain manipulation and is messing with our minds. So just
stay steady as a ship forward and let the jackasses
play games with our money in the markets
what ever msn money.......i love sites who change the format and it only gets worse, eg: ie8 better faster more secure and after every update it works slower and has more hicups than ie7!!
can't edit my own post, get called a spammer and yet i'm not spamming!!
the musty smell is usually gone after the sun breaks the smog barrier, why do you think i always have these on hand they not earring's
Europe always looks better in the afternoon
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[BRIEFING.COM] The stock market experienced a flat finish to an otherwise-forgettable week. The S&P 500 shed less than one point, maintaining its December loss of 1.7%. Small-caps outperformed as the Russell 2000 gained 0.4%, but the index remains lower by 3.1% this month.
Equities registered opening gains, but the early strength faded during the first 30 minutes of action, sending the major averages to their lows. The key indices spent the rest of the morning near their flat lines ... More
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