Stocks fluctuate as trading resumes after rally
Most major stock indexes finished higher Wednesday, building on Tuesday’s big rally and fueling hope that Wall Street’s turnaround has some legs to it.
Although the market faded near the closing bell, traders were mostly grateful for what didn’t happen: a demoralizing giveback of much of Tuesday’s 379-point, 5.8% surge in the Dow Jones industrials.
Instead, the market traded in a narrow range for much of the day, which at least suggested that investors weren’t rushing to cash out after the previous session’s rebound.
The Dow finished Wednesday up 3.91 points, or 0.1%, to 6,930.40.
The Standard & Poor’s 500 index rose 1.76 points, or 0.2%, to 721.36. The Nasdaq composite index climbed 13.36 points, or 1%, to 1,371.64.
It was the first time in more than a month that the three indexes recorded back-to-back gains.
“I’m pretty pleased with the action,” said Anthony Conroy, head trader at BNY ConvergEx in New York. “I think people are starting to put a little money to work. This is more than just ‘short covering.’ ”
Rising stocks outnumbered losers by 4 to 3 on the New York Stock Exchange, and beaten-down financial shares led the way for a second straight session.
Here’s a sign of Wall Street’s increased optimism about its own future: Shares of brokerage Morgan Stanley are up 37% in two days, lifting the stock’s year-to-date advance to 40%. Goldman Sachs Group is up 25% in the last two days and up 9.5% for the year.
Yet many analysts say they’re still operating under the assumption that this is a rally in a continuing bear market, like the upturn that lifted the Dow nearly 20% from Nov. 21 to Jan. 2 before the blue-chip average tumbled to fresh lows.
Barry Savitz, a partner at Greenwich Prime Trading in Greenwich, Conn., said the market could bounce 15% to 20% from Monday’s 12-year lows. But he doesn’t see it as more than a trading opportunity for the nimble.
“I’m still looking for a real washout in the market” ahead, Savitz said. Bear-market bottoms, he said, usually occur at the point where almost no one is looking even for a short-term rally.
His hedge fund clients, Savitz said, “don’t trust anything they hear” about the market or the economy. “They’re trying to preserve their capital.”
That mentality may have helped the Treasury bond market late Wednesday: The government sold $18 billion of new 10-year T-notes early in the day at a higher-than-expected annualized yield of 3.04%, a sign of disappointing demand for the debt. But soon after the auction, buyers flooded into the market, driving the market yield on the 10-year notes down to 2.91%.
The rush back to Treasuries signals that “bond investors still remain skeptical of stocks’ latest move,” said George Goncalves, a bond strategist at Morgan Stanley in New York.
The Treasury is scheduled to sell new 30-year bonds today.