Stocks close modestly higher despite weak economic data
Stocks advanced modestly Tuesday after Wall Street shrugged off a sharp drop in orders for manufactured goods and took comfort in the first gain in existing home sales in eight months.
But the Commerce Department’s report that orders for durable goods fell 8.3% in October -- the largest drop in more than six years -- stoked concerns that the economy was slowing at too fast a pace, sending the dollar to a fresh 20-month low against the euro.
The euro traded at $1.319, up from $1.313 on Monday.
The weak economic data also sent the benchmark 10-year U.S. Treasury note to its lowest level since January. The yield on the 10-year T-note sank to 4.50% from 4.53% on Monday.
The downbeat economic news was tempered slightly by a report from the National Assn. of Realtors showing a slight uptick in home sales, although it also revealed that the median selling price fell by the steepest level on record last month.
The Dow Jones industrial average was up 14.74 points, or 0.1%, at 12,136.45, after falling 158 points Monday.
Broader stock indicators also rose. The Standard & Poor’s 500 index was up 4.82 points, or 0.4%, at 1,386.72, and the Nasdaq composite index rose 6.69 points, or 0.3%, to 2,412.61.
On Monday, the market had its worst session in more than four months. John Zielinski, a portfolio manager at Neuberger Berman, contends that the market’s drop was overblown and that investors could be seeing lower-than-usual liquidity given that Thursday marks the end of the fiscal year for many brokerages and they are therefore trying to lock in gains.
“The moves seem to be a little bit exaggerated based on the data points we’re seeing,” he said.
The rise in stocks came after investors showed little reaction to comments by Federal Reserve Chairman Ben S. Bernanke that he remained concerned that inflation or a steeper-than-expected decline in the housing market could harm an already slowing economy.
That markets essentially held their ground Tuesday bolstered the assessment that Monday’s pullback was largely profit-taking. The major indexes have turned in impressive performances for the year, with the Dow up 13.2%, the S&P; up 11.1% and the Nasdaq up 9.4%.
“The markets over the last few months have gone pretty far,” Zielinski said. “Sometimes the news doesn’t have to be terrible to get people a little skittish. Today, maybe reality has set in and you’ve got some bargain hunting.”
Doug Sandler, chief equity strategist at Wachovia Securities, likens investors behavior in the final month or so of the year to a nervous driver trying to steer a car while sitting too close to the windshield. Every move, he says, is exaggerated.
“You’ve got so many portfolio managers that are cognizant of where they stand for the year that if the market moves they jump on it, regardless of the direction,” he said.
He contends that Wall Street is less concerned with economic data and is simply trying to ride out the rest of the year. “I think people who are managing portfolios try not to get hurt in the last month of the year.”
Given the barrage of economic news and comments Tuesday, investors seemed little moved by an unexpected drop in the consumer confidence. The Conference Board, a private research group, reported that the figure for November fell to 102.9 in November from a revised reading of 105.1 in October. Analysts had been expecting a reading of 106.
In other markets highlights:
* Walt Disney rose 30 cents to $32.89. After regular trading ended the company said it boosted its annual dividend payment to 31 cents a share, a 15% increase from the 27 cents paid last year. Disney said the dividend would be paid Jan. 12.
* In the municipal bond market, California sold $1.06 billion of tax-free general obligation bonds at an overall interest rate of 4.36%. Proceeds from the bonds, issued in various maturities, will be used to fund state construction projects and retire higher-cost debt. The bonds were purchased by brokerage Goldman Sachs for resale to investors.
* Crude oil futures rose 67 cents to settle at $60.99 a barrel in New York trading. Rising oil prices had helped push stocks lower Monday.
* ServiceMaster gained $1.25, or 10.5%, to $13.15 after the provider of lawn care and pest control services announced that it was considering selling itself. It has retained several investment banks to explore the possibility.
* Quicksilver Resources rose $2.07, or 5.3%, to $41.47 after a Goldman Sachs analyst raised his rating on the independent natural gas and oil producer to “buy” from “neutral.”
