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.

By Charley Blaine Nov 29, 2010 3:01PM
Charley BlaineUpdated: 11:43 p.m. ET

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.
Crude oil 

$85.73

$83.76

5.28%

8.03%
(per barrel)











Heating oil

$2.3581

$2.3162

5.38%

11.46%
(per gallon)











Natural gas 

$4.2100

$4.3990

4.26%

-24.44%
(per mil. BTU)











Unleaded gasoline

$2.2846

$2.2103

10.94%

11.29%
(per gallon)











Retail gasoline

$2.8570

$2.8600

1.71%

8.26%
(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.
President Barack Obama said he would reduce federal spending and shrink the budget deficit by announcing pay freezes for federal workers.  The measure will save $2 billion in 2011, $28 billion in the next five years and more than $60 billion over 10 years.

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.

 

BP's (BP) shares in New York slipped 0.8% to $40.59 after it announced it will sell a stake in an Argentina asset to help pay for the costs of the Gulf of Mexico oil spill.

  

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.
Treasury yields




 





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%
Currencies











U.S. Dollar Index

80.902

80.433

4.45%

3.43%
British pound

$1.5581

$1.5605

-2.94%

-3.68%
(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%
yuan











Canada dollar

$0.98

$0.98

-0.01%

3.33%
(in U.S. $)











U.S. dollar 

$1.02

$1.02

0.01%

-3.23%
(in Canadian $)











Commodities

 

 

 

 
Gold

$1,366.00

$1,362.40

0.62%

24.61%
(per troy ounce)











Copper

$3.76

$3.75

0.66%

12.30%
(per pound)











Silver

$27.15

$26.70

10.52%

61.16%
(per troy ounce)











Wheat 

$6.50

$6.48

-9.34%

20.08%
(per bushel)











Corn

$5.38

$5.38

-7.52%

29.86%
(per bushel)











Crude oil 

$85.73

$83.76

5.28%

8.03%
(per barrel)












26Comments
Nov 29, 2010 4:58PM
avatar

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

Nov 29, 2010 4:36PM
avatar

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.

Nov 29, 2010 9:32PM
avatar
I'm gonna use this crap next time I go to the casino...tell my wife " hey, I had a great day only lost 39000 instead of 139000
Nov 29, 2010 8:14PM
avatar

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! Eye-rolling

 

Now those are the ultimate idiots and imbeciles with their blinders always on and the ones that are "WRONG" 100% of the time. Thumbs up

 

Nov 30, 2010 12:36AM
avatar

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!

Nov 29, 2010 11:47PM
avatar
Only somebody intimately involved in the stockino market could call a 40 point loss a big rebound.
Nov 29, 2010 11:44PM
avatar
As there will ALWAYS be something in the world for "investors" to be worried about, why invest in the stock market?  As you earn money - spend most of it, put some in a sock it and to h*ll with Wall Street.  We little people are getting s c r e w e d by the Las Vegas -style economic types.
Nov 29, 2010 5:52PM
avatar
Money Wise -  Whewwww you had me going for a minute.  I was ready to say something like : "oh no, not you.  Not our only serious guiding light on MSN".   Then I read your second paragraph.   Smile
Nov 29, 2010 5:07PM
avatar

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.

Nov 29, 2010 8:30PM
avatar

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! Beer mug

Nov 29, 2010 8:11PM
avatar

Moneywise,

 

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

Nov 29, 2010 7:16PM
avatar
I think we should give the banks billions more to invest in the market dirt cheap and then reap the profits.  what a great system.  little guy ? screwed as usual.  good to know we have someone in DC looking out for us.
Nov 29, 2010 6:44PM
avatar
I can see the stimulas money being invested in the market again to avoid a loss. I did see the government say they are freezing future pay raises. Shortly after that statement then the markets regained some lost ground.So far the stimulas has been used to cover losses in corporate stocks. I dont believe that corporations are wanting to hire if they still require taxpayers help to maintain profits on wall street. Yeah the taxpayers are here to try to salvage our own invested money, so we pay in taxes to try to secure the money we have already invested. What a way to sustain a enterprise. Decieving,manipulation on a scale never seen before. I have alot invested in the markets for retirement and I am nervous as hell when the majority of the Baby Boomers are at that age.  I feel like I have my retirement on the table at a casino and my odds might really suck at this time. I cant be the only person who feels this when you consider the laws and accountability issues at hand.
Nov 29, 2010 6:32PM
avatar
What?  Did the stock market idiots in the U.S. finally wake up and realize that neither China or Ireland are states in the United States?  Ireland is in Europe, China is in Asia.  The United States is in North America.  Get an Atlas, idiots.
Nov 29, 2010 5:15PM
avatar

bucket trading is on again.....with help of fed reserve to back up the loses

 

Bucket trading is the illegal practice of executing an order for a customer at a given price and then conducting an underlying trade on the exchange at a ...
wikipedi
Nov 29, 2010 4:58PM
avatar

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 Smile

Nov 29, 2010 4:50PM
avatar

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!!

Nov 29, 2010 4:48PM
avatar

the musty smell is usually gone after the sun breaks the smog barrier, why do you think i always have these  on hand Martini glassSurprisedMartini glass they not earring's

 

Europe always looks better in the afternoon
Nov 29, 2010 4:13PM
avatar
I thought the rally would happen tomorrow.  Looks like enough people got hosed.  Time for the big boys to buy back.  Europe debt heals itself again.  EU should be renamed the LU (Lazarus Union)  It is continually coming back from the dead.   No need to worry about it again until at least Wednesday or Thursday.  
Prediction
200 point bounce tomorrow due to retail bargain shopping at record levels.  174 point drop on Wed or Thursday because I heard Ireland might have a debt problem.
Nov 29, 2010 4:12PM
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