Stocks open higher on merger of homebuilders
Insurance and technology shares led the market higher in a volatile day Wednesday, breaking a two-day slide. But a dim view of the economy from the Federal Reserve and jitters over looming earnings reports kept buyers in check.
The Dow Jones industrials rose 47.55, or 0.6%, to 7,837.11.
Stocks got an early lift from a deal combining two major home builders and a report saying the government was poised to extend aid to battered life insurance companies, then wavered throughout the day before ending slightly higher.
The Dow had fallen 3% over Monday and Tuesday, which analysts saw as a necessary breather after a powerful rally in March gave the Dow its biggest four-week surge since 1933.
Market watchers say the rally could still continue, but only if corporate earnings reports just now starting to roll out provide encouraging forecasts about where the economy is going -- something that’s far from certain.
“We’re braced for a lousy earnings season because we haven’t had a lot of guidance,” said Frederic H. Dickson, chief market strategist at D.A. Davidson & Co. in Lake Oswego, Ore., referring to companies’ opaque forecasts to start the year. “We’re in a volatile bottoming process.”
In other trading, the Standard & Poor’s 500 index gained 9.61, or 1.2%, to 825.16, and the Nasdaq composite index rose 29.05, or 1.9%, to 1,590.66.
Traders jumped on some glimmers of hope that emerged from the home-building, tech and insurance industries.
A $1.3-billion deal between Pulte Homes and rival Centex will create the nation’s largest home builder. Centex shares jumped 18.9%, while Pulte fell 10.5%. Other home builders were mixed.
Insurers shot up after a report in the Wall Street Journal that the government may soon provide rescue funds to the ailing life insurance industry. Life insurers have been hit hard by investment losses in the last year. MetLife rose 2.4%, Prudential Financial gained 7.7% and Hartford Financial Services Group added 13.5%.
Technology stocks had some of the biggest gains after an encouraging forecast from Juniper Networks. The maker of equipment for computer networks said its first-quarter earnings should meet forecasts even as sales would probably fall short of expectations. Its shares jumped 12%. Cisco Systems added 1.7% and Microsoft gained 2.3%.
Some corporate news weighed on parts of the market. Ryder System tumbled 18% after the truck leasing and logistics company lowered its first-quarter earnings projection. Ryder said the weak economy had eroded demand.
An analysts’ assessment of Bank of America corralled most financial stocks. The Oppenheimer & Co. report, which Bank of America disagreed with, predicted that the company would have to raise an additional $36.6 billion in capital. The stock lost 4.1%. It was the steepest slide among the 30 stocks that make up the Dow industrials.
The day brought mixed economic news. The Commerce Department said wholesalers trimmed their inventories in February by the steepest amount in more than 17 years. But sales rose for the first time since the summer.
Stocks bounced off 12-year lows in early March, surging more than 20% in just four weeks as signs emerged that the economy might be regaining its footing. There have been a few pauses in the rally -- including the drops Monday and Tuesday -- that analysts welcome as evidence that traders are avoiding becoming euphoric over the prospects for a quick recovery in the economy.
Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.86% from 2.90% late Tuesday.
The dollar showed some strength against other major currencies. That held gold to a moderate gain.
Oil prices rose. Light, sweet crude gained 23 cents to settle at $49.38 a barrel on the New York Mercantile Exchange.
Overseas, Britain’s FTSE 100 slipped 0.1%, Germany’s DAX index rose 0.8% and France’s CAC-40 rose 0.7%. Japan’s Nikkei stock average fell 2.7%.
