Stocks Recover From Early Sell-Off
A plunge in consumer confidence incited another wave of profit-taking Tuesday on Wall Street, but stocks largely recovered by late in the session as buyers returned.
In the bond market, yields tumbled anew on Treasury securities as the confidence report boosted some investors’ hopes that the Federal Reserve will cut short-term interest rates next week.
The stock market took a sharp hit early in the day after the Conference Board said consumer confidence fell in October to a nine-year low. The report sent the Dow Jones industrials as low as 8,198, a drop of 170 points, or 2%.
The market struggled for much of the session after the early slide. But buyers rushed back in during the final 90 minutes, driving the Dow to a close of 8,368.94, a gain of 0.90 point on the day.
The Nasdaq composite index lost 15.29 points, or 1.2%, to 1,300.54, but it had been down as much as 36 points.
By the close, losers still outnumbered winners by 17 to 14 on Nasdaq and by 18 to 14 on the New York Stock Exchange, but that was a considerable improvement in breadth from early in the day.
“Barring something really big or really unexpected, the bad news is in this market” already, Brian Pears, head of equity trading at Victory Capital Management in Cleveland, told Bloomberg News. That’s why the early sell-off wasn’t sustained, he said.
“There is nothing new here. We all knew consumers were worrying about the decline in the stock market and the geopolitical situation,” said Peter Cardillo, chief strategist at Global Partner Securities Inc.
Still, analysts said investors remain jittery after the powerful rally of mid-October that lifted stocks from five-year lows. Several major rallies have ensued since the bear market began in March 2000, but all have fizzled relatively quickly.
The confidence report triggered another flood of money into the Treasury market, as traders and investors bet the Fed now has more reason to reduce its benchmark short-term interest rate from the current 40-year low of 1.75%. The Fed meets on Nov. 6.
“The bond market is looking for one rate cut, but it may take two or three to get things going -- it all depends on the consumer,” Gary Pzegeo, money manager at Gannett Welsh & Kotler in Boston, told Bloomberg News. “We may need more, not less Fed, and that means bonds can continue to rally.”
That sentiment drove the yield on the two-year T-note to 1.76% Tuesday, down from 1.89% Monday and the lowest since Oct. 10.
The yield on the 10-year T-note -- a benchmark for mortgage rates -- dropped to 3.94% from 4.09% Monday.
Yields had soared in mid-October as stocks recovered and investors figured the Fed probably wouldn’t ease credit further. But economic reports in recent weeks have painted a picture of an economy that has lost its momentum.
The 10-year T-note hit a generational low of 3.57% on Oct. 9, then rocketed to 4.26% by Oct. 22.
Among Tuesday’s highlights:
* Airline stocks were broadly lower after rebounding for much of the last week. UAL, parent of United Airlines, lost 23 cents to $2.27, while Delta Air Lines fell 24 cents to $10.11 and Southwest was down 68 cents to $14.72.
* Energy stocks tumbled with crude prices. Exxon Mobil gave up $1.41 to $33.23 and Unocal lost $1.44 to $26.96.
* On the plus side, Procter & Gamble jumped $3.26 to $89.01 and Estee Lauder advanced $1.70 to $29.06 after each company posted third-quarter earnings that beat expectations.
* Tenet Healthcare continued to slide after an analyst’s downgrade hammered the stock Monday. The shares dropped $3.25 to $39.25 after falling $6.81 on Monday.
* European markets suffered heavy losses, hit by the U.S. consumer confidence report, which was released near the close of European trading. The German market dropped 5.5% while the British market sank 3.8%.
Market Roundup, C7-8
