Stocks mixed after second volatile day
The U.S. stock market finished mixed after another erratic session Thursday amid signs that the Federal Reserve’s latest attempt to ease the banking credit crunch may be working.
Wall Street fared much better than many Asian and European stock markets, which suffered sharp losses overnight.
Volatility remained at high levels: The Dow Jones industrial average fell as much as 120 points early in the session, dragged down by another sell-off in financial shares. But buyers returned later in the day and the Dow ended with a gain of 44.06 points, or 0.3%, to 13,517.96.
An upbeat 2008 outlook from conglomerate Honeywell helped boost the Dow. Honeywell jumped $2.91, or 5%, to $60.65.
Major market indexes were mixed, however, and falling stocks outnumbered winners by nearly 2 to 1 on the New York Stock Exchange.
Markets were buffeted by continuing concerns about the banking system and by fresh data for November that showed surprising strength in retail sales and a larger-than-expected rise in wholesale inflation.
The retail sales data may have damped some investors’ worries that the U.S. could fall into recession, reducing demand for Treasury securities as a haven. The yield on the 10-year Treasury note jumped to 4.20% from 4.09% on Wednesday and a one-month high.
But bond yields also may have risen on expectations that the Fed’s plan to make loans available to cash-starved banks will calm the credit markets. Worries about the banking system had driven many investors into the perceived safety of Treasuries in recent weeks.
The Fed announced its bank-lending plan Wednesday, in coordination with other major central banks. One goal was to put downward pressure on interest rates in the so-called LIBOR market, or London interbank offered rate, where banks make short-term loans to one another.
On Thursday, the rate on three-month LIBOR loans made in dollars eased to 4.99% from 5.06% a day earlier.
But three-month loans in euros were nearly unchanged from Wednesday, at 4.95%.
European stock markets fell sharply overnight as LIBOR rates there remained stuck. Germany’s main market index sank 1.8%. The British market slumped 3% and the Spanish market tumbled 2.3%.
Asian markets also had a tough session. Japan’s Nikkei 225 index fell 2.5% and Hong Kong’s main index dropped 2.7%.
The central banks’ efforts “aren’t going to address the root cause of the [credit] crisis,” said Cyril Beuzit, head of interest rate strategy at BNP Paribas in London. “Banks are still reluctant to lend money to each other because there are serious concerns about potential further bad news” in terms of loan write-offs, particularly in mortgages, he said.
U.S. bank and brokerage stocks finished mostly lower Thursday but were up from their worst levels of the day.
Bank of America fell as low as $42.01 but ended at $43.05, off 38 cents. Merrill Lynch dropped as low as $55.45 but finished at $57.83, off 98 cents. Bear Stearns slid $2.45 to $98.39.
Among broad market indexes, the Standard & Poor’s 500 edged up 1.82 points, or 0.1%, to 1,488.41; the Nasdaq composite slipped 2.65 points, or 0.1%, to 2,668.49.
Among the day’s market highlights:
* Utility stocks attracted buyers, a sign that some investors remain cautious about the economic outlook. Utilities are classic “defensive” issues, meaning their earnings are expected to hold up better than those of many industries in a recession.
Exelon jumped $2.60 to $85.11, FirstEnergy gained 90 cents to $73.59 and CenterPoint Energy added 37 cents to $18.37.
* Biogen Idec plunged $17.97, or 24%, to $57.91. The maker of drugs for cancer and multiple sclerosis said it took itself off the auction block after no bidders emerged.
* JetBlue Airways rose 90 cents to $7.15. Lufthansa said it would buy a 19% stake in the airline for $300 million.
* The seesaw in oil prices continued, with crude futures sliding $2.14 to $92.25 a barrel after surging $4.37 on Wednesday.
* The dollar’s recent rally gained steam, underpinned by the stronger-than-expected November economic reports. If recession isn’t looming, the dollar may continue to rebound, some analysts say. The euro fell to $1.462 from $1.472 on Wednesday. It has pulled back from a record $1.487 on Nov. 26.
The U.S. dollar was worth $1.021 Canadian, up from $1.013 Wednesday. Five weeks ago the U.S. currency was worth just 92 cents Canadian.
* The dollar’s gains hurt gold, which had rallied this year as the greenback slid. Near-term gold futures fell $14.50 to $799 an ounce in New York.
