European debt troubles and signs of a sluggish economy in the United States have unsettled investors for months, and Thursday was no different. Stocks fell sharply early, pushing the Dow Jones industrial average down nearly 2 percent before it rallied on new hopes for a Greek austerity plan.
The seesaw session and small drop in stocks at the close pointed to generally gloomy investors hopping from headline to headline as they sought clarity. The volatility also signals further fluctuations in sentiment, with stocks headed for an unclear direction on Friday. After posting losses for six of the last seven weeks, the Standard Poor’s 500-stock index was showing a weekly gain of nearly 1 percent at Thursday’s close. It has fallen just nearly 6 percent since the end of April.
“The Greece situation has been a threatening dark cloud hanging over the markets,” said Lawrence R. Creatura, portfolio manager at Federated Investors.
“We are in uncertain times, everybody knows it and that creates volatility, but also opportunity.”
The Dow Jones industrial average fell 59.67 points, or 0.49 percent, to 12,050 on Thursday. The S. P. 500 declined 3.64 points, or 0.28 percent, to 1,283.50, and the Nasdaq composite index rose 17.56 points, or 0.66 percent, to 2,686.75.
Greek debt problems have battered markets for weeks with concerns about contagion to other countries in the euro zone and its effect on banks.
At the same time, the latest economic data has served as reminders of the challenges to the United States economy, including a slowdown in hiring in May and a housing sector that is still trying to recover.
The seesaw in stocks started shortly after the open, when the Dow, less than two hours into trading, fell 234.73 points, or 1.9 percent, to its intraday low of 11,874.94.
Analysts offered a range of reasons for the slump, starting with the Federal Reserve saying on Wednesday that the economy was not expanding as quickly as predicted and that it would complete the purchase of $600 billion in Treasury securities next week, then pause.
Late Wednesday, Jean-Claude Trichet, president of the European Central Bank, said that the link between the Greek debt problem and banks was “the most serious threat” to financial stability in the European Union, according to Bloomberg News.
On Thursday, the Labor Department said initial claims for unemployment were up 9,000, to 429,000 last week, according to seasonally adjusted figures. The four-week moving average was unchanged at 426,000.
Stanley A. Nabi, the chief strategist at Silvercrest Asset Management Group, said the debt troubles in Europe were only one of the factors affecting the market on Thursday. “I think the decline is substantially connected to the Fed having lowered economic expectations for the next several quarters,” he said. “And then the employment data that came out this morning was not particularly robust.”
Adding to the uncertainty, some analysts said, was the International Energy Agency announcement that the United States would provide half of the 60 million barrels of petroleum reserves being released to world markets, with other nations releasing the rest. The action is meant to replace some of the oil production lost because of the conflict in Libya.
“It shocked the market,” said Doug Cote, the chief market strategist for ING Investment Management. “This looks like thinly veiled stimulus,” he said. “The big question weighing on the market is why now?”
But other analysts said the oil announcement suggested consumers could get relief at the gas pump, and that mostly sovereign debt and economic issues, including the faltering United States federal budget talks, were to blame for pushing stocks lower.
News at the end of the day that Greece had reached some approval for austerity measures helped the indexes recover.
“It was kind of a rocky ride over the last hour,” said Stephen J. Carl, head equity trader at the Williams Capital Group.
“It was almost an 11th-hour save,” said Mr. Creatura.
European markets were down. The FTSE 100 in London fell 1.71 percent on Thursday, while the CAC 40 in Paris declined 2.16 percent and the DAX index in Germany dropped 1.77 percent.
“Investors are worried about the same things that have been worrying them for some months,” said Adrian Darley, head of European equities at Ignis Asset Management in London. “It’s the weak U.S. data, a consensus of overheating in China and concerns about Europe. The Greek situation is still unsolved and markets are going to remain very nervous.”
The Treasury’s 10-year note rose 18/32, to 101 26/32. The yield fell to 2.91 percent, from 2.98 percent late Wednesday.
Energy and bank stocks in the were down nearly 2 percent. Airline stocks, sensitive to oil prices, rose. Exxon Mobil was down 1.73 percent, to $78.44. Chevron fell 1.69 percent, to $99.36. Marathon Oil declined 2.22 percent, to $51.62.
Julia Werdigier contributed reporting from London.
Article source: http://feeds.nytimes.com/click.phdo?i=1f512193048acfd5d729a477f67eb131
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