Late Sell-Off Erodes Rally
A late-day sell-off left stocks mixed Monday as investors put aside their enthusiasm over acquisitions and evidence of a still-strong economy and cashed in profits from an early advance.
Reports showing a softening in manufacturing growth but an upswing in construction spending left many investors optimistic about the economy’s health, analysts said.
The early buying sent the Dow Jones industrials up 138 points and had the Standard & Poor’s 500 and Nasdaq composite indexes near multiyear highs.
The market’s momentum waned late in the day as nervous investors chose to play it safe and take money out of stocks and bonds.
The mixed economic news indicated that the economy, while perhaps tapering, continued to move forward, said Jay Suskind, head trader at Ryan, Beck & Co. That could lead to more credit tightening by the Federal Reserve.
“I think it’s the same old story: The economy certainly surprises us by how resilient it is,” Suskind said, but he added that most on Wall Street were focused on March employment data due later this week.
The Dow gained 35.62 points, or 0.3%, to 11,144.94. The Dow rose 3.7% in the quarter ended Friday.
Broader stock indicators were mixed Monday. The S&P; 500 rose 2.98 points, or 0.2%, to 1,297.81; the Nasdaq dropped 3.05 points, or 0.1%, to 2,336.74.
U.S. Treasury yields rose, as did yields on government bonds around the world, on signs manufacturing in Germany and Japan gained in March -- adding to evidence that central banks will need to raise interest rates further this year.
The 10-year Treasury note rose to 4.86% from 4.85% on Friday and its highest since May 2004. Last week, the Federal Reserve lifted its key short-term interest rate for the 15th straight time and suggested that there might be more increases.
Investors shrugged off an uptick in oil prices amid supply concerns related to political tension in Iran and Nigeria. A barrel of light crude rose 11 cents to settle at $66.74 in New York trading.
The Institute for Supply Management said its manufacturing index for March fell 1.5 points to 55.2, contrasted with forecasts for a 1-point rise.
However, the index’s prices-paid component surged 4 points to 66.5, the highest level since November and a worrisome sign for inflation.
Elsewhere, the Commerce Department said construction spending grew 0.8% in February, up from a 0.4% increase the month before and besting the consensus estimate of 0.8%.
Although Monday’s economic numbers were troubling for a market fixated on rising interest rates, traders said they were awaiting Friday’s employment report from the Labor Department for a clearer signal of how fast the economy is expanding.
Until then, the market’s upward momentum should carry stocks higher after a decline toward the end of last month, some analysts say. The start of the new quarter and strength in overseas markets should also improve Wall Street’s mood, said Michael Sheldon, chief market strategist for Spencer Clarke.
“We’re seeing a continuation of the trends that were generally in place through much of the first quarter,” Sheldon said, adding that April was traditionally the Dow’s strongest month of the year. “We continue to see a number of uncertainties below the surface, but investors have mostly focused on the positives.”
In other market highlights:
* Precious and industrial metals soared amid fund buying, buoyed by a weak dollar and higher oil prices. Gold futures rose $7.60 an ounce to $589.40, their highest level since January 1981 and within striking distance of the psychologically key $600-an-ounce level.
Phelps Dodge led an advance among raw-material producers, adding $3.20 to $83.73 as the price of copper climbed to a record. U.S. Steel, the biggest U.S. steelmaker, advanced $1.51 to $62.19.
* Monday’s acquisitions were led by General Motors’ deal to sell a majority stake in its auto financing unit for $14 billion. Lucent Technologies also agreed to be acquired by Alcatel for $13.4 billion in stock.
GM, which also said March vehicle sales dropped 14.3%, sank $1.13 to $20.14. Lucent added 3 cents to $3.08. Alcatel’s American depositary receipts gained 81 cents to $16.21.
* A gauge of energy shares rose 0.5% for the third-biggest advance among 10 industry groups in the S&P; 500. Exxon Mobil added 17 cents to $61.03.
* Archer-Daniels-Midland picked up $1.56, or 4.6%, to $35.21 for the second-biggest gain in the S&P; 500. The producer of ethanol may see its share price surge as much as 30% within a year as demand for the corn-based alternative fuel rises, Barron’s said.
* RadioShack lost 80 cents, or 4.2%, to $18.43. The No. 3 U.S. electronics chain was cut to “neutral weight” from “overweight” by Prudential Equity Group analyst Mark Rowen.
* Among foreign markets, Japan’s Nikkei 225 index rose 1.6% to a five-year high of 17,333.31. Mexico’s main market index jumped 1.9% to a record 19,634.21.
