February 28, 2024

Wall Street Rebounds on Europe Hopes

In late afternoon trading, the Dow Jones industrial average was up 212.93 points, or 1.97 percent, to 10,984.91. The Standard Poor’s 500-stock index rose 16.79 points, or 1.48 percent, and the Nasdaq composite index was up 10.90 points, or 0.4 percent, to 2,494.13. Meanwhile, gold prices were down for a fifth consecutive day. They trading at $1,592.50 an ounce, down from a peak of nearly $1,900 on Aug. 22. Analysts attributed the drop to investors looking for cash, but some also described it as a correction for a commodity that has reached historic highs in recent weeks. Analysts said that Wall Street investors were looking for evidence that European governments would grapple with the Continent’s debt crisis.

A spokesman for the European Commission confirmed that discussions were under way on plans to extend the effectiveness of the bailout fund. Commission officials said part of the plan would expand the borrowing power of the euro area’s bailout fund but not the amount of money that nations were contributing. But as has often been the case, European leaders on Monday seemed to have different perceptions of what was being discussed and how likely it was that the proposals would find support.

Markets were likely to remain unsettled until it became clear that European governments would take concrete action, said Kevin H. Giddis, the executive managing director and president for fixed-income capital markets at Morgan Keegan Company.

“It’s going to be every day, all week long, until the market understands exactly what direction this is headed, and whether it can be stopped with one country or is the beginning of a contagion,” he said.

Monthly new-home sales in the United States hit a six-month low in August, at a seasonally adjusted annual rate of 295,000 homes, down from 302,000 in July. Prices were down 8.7 percent, the Commerce Department reported. Separately, a forecast of third-quarter earnings based on data by Thomson-Reuters predicted that the earnings of S.P. 500 companies would rise 13.7 percent, down from an earlier forecast of 17 percent.

But analysts said that the markets have grown somewhat numb to news of weakness in the American economy, so the negative news had a negligible impact.

The deadlock over the federal budget may also be a drag on investors still smarting from the debt-ceiling debate this summer, said David Joy, chief market strategist with Ameriprise Financial.

“I think it’s impossible with that backdrop for investors’ confidence to moderate and rise,” he said.

The Nasdaq lagged behind the other major indexes after a report from Bloomberg News that Apple was cutting orders to vendors who supply parts for the iPad. Apple’s shares were down as much as 3.2 percent before recovering somewhat.

Yields on 10-year United States Treasury bonds rose to 1.90 percent after falling last week.

In Europe on Monday, the benchmark Euro Stoxx 50 closed up 2.8 percent, and the DAX in Frankfurt closed up 2.9 percent. The FTSE 100 in London rose 0.5 percent.

In the Asia-Pacific region, stocks declined, compounding the sharp falls they had suffered during the previous week. In Japan, the Nikkei 225 index dropped 2.2 percent, ending at 8,374.13 points. The Kospi in South Korea ended down 2.6 percent and the Taiex in Taiwan declined 2.4 percent on Monday. The Hang Seng was 1.5 percent lower.

A technical issue kept the Dow Jones industrial index from accurately updating for 12 minutes at the beginning of trading in New York. The index opened flat as its component stocks and other indexes rose in the minutes after the opening bell. A press officer for the index said the problem was fixed.

Matthew Saltmarsh contributed reporting from London and Bettina Wassener contributed from Hong Kong.

Article source: http://www.nytimes.com/2011/09/27/business/global/daily-stock-market-activity.html?partner=rss&emc=rss

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