Wall Street managed a moderate gain today after a back-and-forth session that saw investors snapping up energy and materials stocks and...
NEW YORK — Wall Street managed a moderate gain today after a back-and-forth session that saw investors snapping up energy and materials stocks and dumping financial shares. Shifting sentiment over a possible bailout deal for Detroit’s Big Three automakers and the health of financial companies had major indexes alternating between gains and losses during the session.
The Dow Jones industrial average rose 70.09, or 0.8 percent, to close at 8,761.42. On Tuesday, the Dow shed 243 points after disappointing corporate news reminded investors of the magnitude of the economy’s troubles. Stocks had rallied for two sessions before the decline.
Broader stock indicators also advanced today. The Standard & Poor’s 500 index rose 10.57, or 1.2 percent, to 899.24, and the Nasdaq composite index rose 18.14, or 1.2 percent, to 1,565.48.
The gains Wednesday represent the continuation of the market’s advance since late November. It has been punctuated by a few steep sell-offs, including Tuesday’s slide. Rising commodity prices have helped energy stocks while worries about balance sheets hit financial stocks.
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The market seesawed as financial companies retreated on fears that some might have to come up with fresh capital as they struggle with tattered balance sheets.
American International Group (AIG) said today it is trying to work out plans to square away $10 billion lost in bad trades without turning to taxpayers for more money. Last month, the government said it would provide $150 billion to help the insurer remain afloat after tight credit markets made it difficult to access cash.
“I think the fear is that there is going to be a continued need to raise capital,” said Ryan Larson, head of equities trading at Voyageur Asset Management.
That fed worries that other financial houses might be facing their own troubles after placing wrong bets in the unforgiving markets in recent months. The concerns rippled through financial services stocks, causing banks including Citigroup to give up early gains.
Wall Street was also nervous about the level of opposition to efforts to aid U.S. automakers. Democrats in Congress and the White House finalized an agreement on $14 billion in loans for Detroit’s struggling car companies. However, the plan negotiated by the White House is being opposed by a group of conservatives led by Sen. John Ensign, R-Nev.
The proposal would provide relief for General Motors and Chrysler. Ford Chief Executive Alan Mulally and Executive Chairman Bill Ford Jr. told The Associated Press on Tuesday they don’t need to take the bailout.
Russell Croft of the Croft Value Fund in Baltimore said a government rescue for the automakers is important because it could not only prevent bankruptcy filings but also prevent financial troubles from spreading to other companies tied to the industry.
The stock market’s run during the past several weeks has encouraged some on Wall Street that stocks might be carving out a sustainable recovery. Since reaching multiyear trading lows on Nov. 20, the Dow has risen 15 percent and the broader S&P 500 has risen 18.1 percent, while the Nasdaq is up 17.6 percent, despite Tuesday’s decline.
In the Treasury market, the four-week bill auctioned with a zero percent yield on Tuesday saw that rate increase. The yield rose to 0.05 percent after having been auctioned on Tuesday with a yield of zero percent. The auction was a dramatic sign of how cautious investors are — they are willing to park their money for the short term in investments that will pay them nothing at all but that will preserve their principal.
Wall Street appears growing more accustomed to the idea that economic news will remain dismal for at least several months and likely well into next year. Investors looked past a sharp drop in wholesale inventories. The Commerce Department said wholesalers reduced their inventories in October by the largest amount since after the 2001 terrorist attacks as their sales fell by a record amount. Inventories fell by 1.1 percent, far beyond the 0.2 percent economists expected.
Croft contends the market’s generally more measured moves in recent weeks are important because they could allow investor confidence to return even in the face of bad economic readings.
“We know the economic numbers are going to be bad,” he said. “Hopefully some of the volatility will kind of slow down a bit.”
One of Yahoo’s biggest shareholders issued an open letter to the Internet company’s board urging a deal with Microsoft be salvaged. Ivory Investment Management, which owns a 1.5 percent stake in Yahoo, said the company should sell its search engine business to Microsoft; that could deliver shareholders between $24 and $29 a share. Yahoo shares rose 9.9 percent to close at $13.40.
Oil prices rose above $44 a barrel during today’s session as investors looked to an expected OPEC production cut next week, a moved aimed at helping to stabilize prices that have plummeted amid a global economic slowdown. Light, sweet crude for January delivery rose 3.4 percent, or $1.45, to settle at $43.52 on the New York Mercantile Exchange.
Overseas, Hong Kong’s Hang Seng index closed up 5.59 percent, while Japan’s Nikkei 225 added 3.2 percent. Britain’s FTSE-100 fell 0.3 percent, Germany’s DAX added 0.5 percent, and France’s CAC-40 rose 0.7 percent.