Bargain hunters account for modest gain
NEW YORK – Wall Street finished moderately higher Thursday as investors, still nervous about the economy, decided to buy back into a stock market pummeled by three straight days of losses.
With the market having largely priced in the possibility of a recession, many believe there are plenty of valuable stocks at cheap prices. Before Thursday, the Dow Jones industrial average had fallen this week by 543 points, or 4.26 percent, giving up all of last week’s sharp gains.
Though the market ended up rising Thursday, trading was extremely fickle because of a batch of gloomy data that included declining January sales at major retailers, a drop in December pending sales of homes and a disappointing outlook from Internet networking supplier Cisco Systems Inc. Major indexes seesawed throughout the day.
“We’re kind of trying to create a silk purse out of a sow’s ear here,” said Hugh Johnson, chief investment officer of Johnson Illington Advisors. “The earnings are lousy, the economic numbers are lousy.”
The Dow rose 46.90, or 0.38 percent, to 12,247.00 after trading down about 80 points and up about 130. The index remains more than 13 percent below its record close on Oct. 9, 2007 of 14,164.53.
Broader stock indicators also recovered some ground. The Standard & Poor’s 500 index rose 10.46, or 0.79 percent, to 1,336.91. The technology-heavy Nasdaq composite index rose 14.28, or 0.63 percent, to 2,293.03.
Government bonds fell. The 10-year Treasury note’s yield, which moves opposite its price, rose to 3.76 percent from 3.60 percent late Wednesday.
Investors may have been encouraged to buy back into stocks due to a rise in the dollar, whose decline over the past several months has contributed to worries about inflation and a possible drop in foreign interest in U.S. investments.
Peter Cardillo, chief market economist at Avalon Partners, said the dollar’s advance followed remarks by European Central Bank chief Jean-Claude Trichet that the United States and Europe remain economically intertwined. This suggested to investors that strength in other countries can help stabilize the United States during its rough patch. As expected on Thursday, the Bank of England lowered its key interest rate by a quarter percentage point to 5.25 percent, its second cut in three months, while the European Central Bank left its key rate unchanged at 4 percent.
Overseas, many Asian markets were closed for a holiday, but Japan’s stock market was open and its Nikkei average rose 0.82 percent. In Europe, Britain’s FTSE 100 fell 2.58 percent, Germany’s DAX index fell 1.66 percent, and France’s CAC-40 fell 1.92 percent.