Dow Avoids Another Triple-Digit Loss
Stocks ended broadly lower Tuesday but Wall Street rebounded from its worst levels of the session, saving the Dow Jones industrials from another triple-digit loss.
Analysts said the market’s volatility demonstrated that many investors remain nervous about the trends in inflation and interest rates and what they might mean for the economic expansion.
The Dow ended off 46.58 points, or 0.4%, to 11,002.14, after being down as much as 122 points, or 1.1%, early in the session.
The Dow avoided closing below 11,000. Its last close below that level was on March 9.
A wave of buying lifted stocks in the final 30 minutes of trading.
The Standard & Poor’s 500 index closed with a loss of 1.44 points, or 0.1%, at 1,263.85, after being down as much as 0.8%.
The Nasdaq composite fell 6.84 points, or 0.3%, to 2,162.78 after trading as low as 2,144.
Losers topped winners by fewer than 2 to 1 on the New York Stock Exchange. Losers had nearly a 4-to-1 edge in the previous session.
The Dow had tumbled nearly 200 points Monday after Federal Reserve Chairman Ben S. Bernanke spooked investors by adopting a hawkish tone about inflation.
Speaking in Washington, Bernanke said rising inflation pressures were “unwelcome” and that the Fed “will be vigilant” about suppressing those pressures.
His tone was viewed as a warning that the Fed probably would raise its benchmark short-term interest rate when policymakers meet this month, even if the economy continues to slow. It would be the 17th rate increase since mid-2004.
“Growth is going to slow with inflation rising,” said James Harrington, chief investment officer for Brinker Capital in Berwyn, Pa. “That’s why people are hunkered down.”
Stocks worldwide have been tumbling since mid-May on fears that the Fed and other major central banks might make credit too tight, triggering a global recession.
“(S)eeds of confusion continue to be sown by this new Fed, and there is no doubt a risk that we will see a policy misstep at the end of June,” wrote David A. Rosenberg, Merrill Lynch’s North American economist, in a note to clients Tuesday.
On Tuesday, Federal Reserve Bank of St. Louis President William Poole seemed to echo Bernanke’s hawkishness about inflation. But other Fed officials noted that monetary policy acts with a lag on the economy, which could call for patience in trying to further rein in inflation, analysts said.
The U.S. market’s plunge on Monday triggered widespread selling in foreign markets on Tuesday.
Japan’s Nikkei 225 index slid 1.8%, while India’s Sensex index fell 2.5%.
Major European indexes also dropped, with Ireland’s benchmark index plummeting 4.9%. The German market lost 2.1%.
In Mexico, stocks fell 0.8%, reviving late in the day with U.S. stocks.
In one troubling sign, the S&P; 500 slid under its 200-day moving average, a long-term trend line that measures a security’s or a stock index’s resilience, analysts said.
One technical analyst said the next key level to watch on the Nasdaq is 2,025, and said that breaking that level could take the index sharply lower. The Dow’s next support base is 10,750, he said.
In other markets, oil prices were little changed. Near-term crude futures in New York eased 10 cents to $72.50 a barrel.
The Treasury bond market also was calm. The 10-year T-note yield dipped to 5% from 5.02% on Monday.
Gold tumbled $13.80 to $629.40 an ounce in New York after two days of gains.
Among the day’s market highlights:
* A gauge of raw-materials shares lost 0.8% for the worst performance among 10 major industry groups in the S&P; 500. Eastman Chemical, the world’s biggest producer of plastics for beverage bottles, slumped $1.82 to $54.22. The company was downgraded to “neutral” from “buy” at Banc of America Securities. Analyst Kevin McCarthy wrote in a note to clients that oversupply in the industry will limit further gains.
Also in the raw materials group, Potash fell $1.13 to $84.54, Deltic Timber slid $1.43 to $57.12 and Alcan dropped $1.61 to $49.39. A weaker economy could depress prices of natural resources.
Among gold mining firms, Newmont Mining slid $1.10 to $51.38 and Agnico Eagle dropped $1.60 to $31.21.
* Many industrial shares also were lower on worries about the economy. Deere tumbled $3.07 to $82, Parker-Hannifin slid $1.43 to $75.45 and Eaton was down 87 cents to $71.90.
* General Motors slipped 80 cents to $25.25 for the Dow average’s steepest percentage drop. Chief Executive Rick Wagoner said the world’s largest automaker faces a challenging sales environment, and its plan to trim costs by $1 billion this year may not be possible. Wagoner spoke at the company’s annual meeting.
* On the plus side, Google soared $15.55, or 4.2%, to $389.99, for the top gain in the S&P; 500. The company announced a new, free spreadsheet product that will compete with Microsoft’s Excel program.
Microsoft, the world’s biggest software maker, fell 37 cents to $22.13.
* Home builders continued to slide on worries about a slowing housing sector. Brokerage Wachovia downgraded a number of the stocks.
D.R. Horton, the nation’s largest homebuilder by units, fell $1.40 to $23.41, KB Home fell $3.28 to $45.82 and Pulte Homes lost $1.64 to $28.11.
