Stocks open modestly lower on economic worries
Shares of consumer product makers and financial companies shot up Wednesday as investors latched onto signs that the recession could be easing. The Dow Jones industrial average closed up 109 points.
Money flowed into stocks like Procter & Gamble, which boosted its dividend, and American Express, which said it wasn’t writing off as much bad debt.
“The market may not be seeing concrete signs of a recovery, but there are specks of light that we’re on the road to stabilization,” said Ryan Larson, senior equity trader at Voyageur Asset Management.
Stocks opened lower on fresh data that offered reminders of the economy’s troubles.
The government reported that production at the nation’s factories, mines and utilities fell 1.5% in March, the fifth straight decline and more severe than the 1% drop analysts had expected. And consumer prices fell 0.1% last month, keeping the threat of deflation alive.
But the market rallied on reports released later in the day.
The Federal Reserve’s snapshot of business conditions around the country suggested that while the economy remains troubled, some areas like manufacturing were stabilizing.
The National Assn. of Home Builders said its index of builder confidence this month posted its biggest gain in five years as low housing costs and a federal tax credit increased interest among prospective home buyers.
The Dow rose 109.44 points, or 1.4%, to 8,029.62. The Standard & Poor’s 500 index rose 10.56 points, or 1.3%, to 852.06. The tech-heavy Nasdaq composite index, held back by disappointment over Intel’s earnings released late Tuesday, edged up 1.08 points, or 0.1%, to 1,626.80. The Russell 2,000 index of smaller companies climbed 1.8%.
More than two stocks rose for every one that fell on the New York Stock Exchange. Volume was light.
Investors bought industrial stocks after cost-cutting at CSX helped the railroad operator post better-than-expected earnings for the first three months of the year. The stock rose 7.8%.
Stocks of companies that sell consumer staples -- considered a refuge during recessions -- posted some of the biggest gains. Procter & Gamble, the maker of Tide detergent and Crest toothpaste, rose 3.2% after boosting its quarterly dividend by 10%.
American Express shot up 12% after saying in a regulatory filing that it had to write off a smaller percentage of loans in March than in February.
Shares of home builders rose on the industry report. Hovnanian Enterprises jumped 21%, while Toll Bros. rose 2.7%.
Tech stocks were down much of the day after Intel late Tuesday failed to provide a detailed revenue forecast while reporting better-than-expected earnings and asserting that PC sales had “bottomed out.” Intel’s stock fell 2.4%.
Traders at times have seemed hesitant to continue the buying spree that began in early March without more convincing signs that the economy is stabilizing or until companies signal they have seen the worst of a recession now in its 17th month.
David Kelly, chief market strategist at JPMorgan Funds, said it could take months for investors to get a better sense of whether the economy has managed to break its slide.
“It’s like April weather,” he said. “Some days it will seem an awful lot like winter, and other days it will feel like spring.”
In other market highlights:
* American Airlines parent AMR jumped 19% after the carrier posted a $375-million loss for the first quarter, which wasn’t as bad as analysts had feared.
* Yields on Treasury bonds fell. The benchmark 10-year T-note dropped to 2.76% from 2.78% late Tuesday.
* The dollar was mixed against other major currencies, while gold prices rose.
* Overseas, key stock indexes fell 1.1% in Japan, 0.5% in Britain, 0.2% in Germany and 0.5% in France.
