March 4th, 2009
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-AP
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NEW YORK - The stock market is showing some signs of life as investors find a few glimmers of hope for an economic turnaround.
The market rallied Wednesday after a week of heavy selling on word of a possible Chinese economic stimulus package and an Obama administration plan to help struggling homeowners. A slightly better-than-expected report on the services sector also helped push stocks higher. All the major indexes rose more than 1.5 percent.
The market’s advance was not surprising following a week of unrelenting selling that has left the major indexes plunging to levels not seen in more than a decade.
“Virtually everyone was expecting some sort of a bounce, we just didn’t know exactly when that would occur,” said Randy Frederick, director of trading and derivatives at Charles Schwab. “You can’t go down forever.”
Still, the market’s tone was more positive and allowed some bargain hunting. Investors were encouraged by details of a government program designed to help as many as 9 million borrowers stay in their homes throughrefinanced mortgages or loans that are modified to lower monthly payments.
Wall Street also followed the lead of overseas markets, which rallied amid optimism over a possible Chinese economic stimulus plan. Prices for oil and other commodities climbed amid the enthusiasm over China.
Meanwhile, the Institute for Supply Management, a trade group of purchasing executives, said its services index fell to 41.6 last month from 42.9 in January. The number was slightly above Wall Street’s estimate of 41. Any reading above 50 signals growth, while a reading below 50 indicates contraction.
Investors also are awaiting the Federal Reserve’s beige book, an assessment of the economy by region, to be released later Wednesday.
In early afternoon trading, the Dow Jones industrial average rose 113.90, or 1.69 percent, to 6,839.92. The Standard & Poor’s 500 index added 11.50, or 1.65 percent, to 707.83, while the Nasdaq composite index gained 27.79, or 2.10 percent, to 1,348.80.
The Russell 2000 index of smaller companies rose 5.86, or 1.62 percent, to $366.87.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to 777 million shares.
Industrial and commodity-related stocks led the market higher as oil prices jumped on hopes for the Chinese stimulus. Exxon Mobil Corp. rose $1.28 to $65.64 and Chevron Corp. rose $1.54, or 2.7 percent, to $59.27. Other big gainers included aluminum producer Alcoa Inc., which advanced 65 cents, or 11.8 percent, to $6.18, and Caterpillar Inc., which jumped $3.78, or 16.8 percent, to $26.25.
Wall Street has made attempts at a rally before, only to slump further as investors find little reason to hold on to stocks. Analysts warned that the market’s advance Wednesday could be fleeting.
“Everybody’s been beaten up so much in the last couple weeks, you’ve got to believe that people are gun-shy,” said Bill Stone, chief investment strategist at PNC Wealth Management. “There’s going to be a little bit of a lack of conviction this week particularly ahead of the Friday employment numbers.”
The Labor Department will release its employment figures for February on Friday. The monthly report has become one of the most watched indicators of the economy’s health, as rising unemployment and the loss of millions of jobs has led consumers to spend less.
On Tuesday, stocks extended their losses; the Standard & Poor’s 500 index fell to its first close below 700 since October 1996. The decline, however, was milder than Monday’s drop, which saw the Dow sink nearly 300 points and both the Dow and the S&P 500 index finish at their lowest levels in more than 10 years.
“We’re very oversold,” said Nicholas Colas, chief market strategist at BNY ConvergEx. “That’s been slim comfort in the last couple of months, but it’s still true.”
General Electric Co. shares sank to an 18-year low Wednesday, a stark reminder that investors’ concerns about the financial sector have yet to subside. The company has been fighting speculation that it may have to sink more money into GE Capital, which makes loans for credit cards, overseas mortgages and commercial projects. Shares dove 63 cents, or 9 percent, to $6.38, after earlier falling to as low as $5.73, a level not seen since 1991.
News that U.S. Bancorp is chopping its dividend by 88 percent further rattled investors. The Minneapolis-based bank, viewed as one of the healthier companies in the sector, joins the ranks of JPMorgan Chase & Co. and dozens of other banks that have slashed their dividends to preserve capital amid the ongoing credit crisis and recession. U.S. Bancorp shares fell $1.27, or 10.1 percent, to $11.31.
The market did get a bit of good news from the housing industry Wednesday, as homebuilder Toll Brothers Inc. said its loss in the fiscal first quarter narrowed as it slashed expenses. Still, revenue plummeted 51 percent as the company sold fewer homes.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.02 percent from 2.89 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, slipped to 0.25 percent from 0.26 percent late Tuesday.
The dollar fell against other major currencies. Gold prices also fell.
Light, sweet crude for April delivery rose $2.14 to $43.79 a barrel on the New York Mercantile Exchange.
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