Stocks Pull Back After Early Surge
Stocks retreated from early gains on Monday, despite signs that manufacturing in the United States was on a path to recovery.
In afternoon trading, the skittishness of investors over the health of the economy appeared to return on the first trading day since the market took one of its steepest plunges in months.
A report by the Institute for Supply Management said the health of the manufacturing sector was at its highest level in three years, substantially beating Wall Street expectations. In addition, a separate report showed increases in the number of home sales, offering hope that a critical sector might be headed for revival.
In response, stocks jumped in early trading, then pulled back at midday. The Dow Jones industrial average rose 28.87 points, or 0.30 percent, to 9,741.60 at 1:15 p.m. The Standard and Poor’s 500-stock index and the technology-heavy Nasdaq composite index were nearly flat.
“These downturns will continue to happen,” said Randy Cass, founder of First Coverage.
“The question is which one will be the one that breaks the camel’s back,” he added, referring to an expectation that the market will adjust after an enthusiastic seven-month rally.
Stocks in financial and telecommunications companies led the decreases.
On Friday, the major averages posted some of the biggest losses in months, with the Dow tumbling 250 points, or 2.5 percent, and the S.& P. 500 falling 2.8 percent.
Many Wall Street analysts wonder whether the drops on Friday were simply an adjustment in the market after weeks of enthusiastic gain, or a harbinger of dreary days to come. Over the last seven months, stocks have rallied at an incredible pace, leaving some analysts skeptical the momentum will last much longer no fax payday loans.
John F. Merrill, chief investment officer at Tanglewood Investments in Houston, said the ups and downs in recent days were the result of investors looking to latch on to any piece of news that beat expectations.
“There’s a seesaw or a tug-of-war going on between those who want to be more invested and those who don’t,” he said. “Those who want to be more invested are looking for reasons to get there.”
Investors were also buoyed by news that the Ford Motor Company posted a higher-than-expected profit of $997 million in the third quarter, its first profitable quarter in North America in more than four years. Ford said cost-cutting and the government’s cash-for-clunkers program helped drive up its earnings. In midday trading, Ford’s stock was up 8.72 percent at $7.61.
European markets turned upward in afternoon trading, with the FTSE 100 in Britain up 1.19 percent, the CAC-40 in France up 0.88 percent, and the DAX in Germany 0.29 percent higher.
Overnight, Asian markets fell in response to the sharp sell-offs in the United States on Friday, with the Nikkei average in Japan closing down 2.3 percent and the Hang Seng in Hong Kong dropping 0.6 percent.
A key economic data point will come on Friday, when the government releases its monthly report on unemployment. The jobless rate is expected to rise slightly, to 9.9 percent, but a sharp deviation could sway markets significantly.
Stocks Pull Back After Early Surge