March 5, 2021

Wall Street Stocks Rise After Long Losing Streak

After four weeks of brutal losses, stocks recovered slightly on Monday following gains earlier in the day in Europe.

By noon in New York, the Standard Poor’s 500-stock index was up 0.2 percent at 1,125.91 points. The Dow Jones industrial average was ahead 52.75 points, or 0.5 percent, at 10,870.40. The Nasdaq composite index was 0.1 percent higher, at 2,344.45.

Stocks fell more than 4 percent last week as Wall Street saw more wild swings, including a 419-point drop for the Dow on Thursday. The main drivers of those losses were fears about stalling global growth and the European debt crisis. Investors marked down share prices as they cut their expectations of corporate earnings based on how severe they expect the new economic slowdown to be.

But those fears appeared to ease a little on Monday. Traders’ attention was turning to the Federal Reserve’s annual symposium later this week in Jackson Hole, Wyo., with some analysts expecting the chairman, Ben S. Bernanke, to announce some further if limited economic stimulus.

“We do not expect Bernanke in his Aug. 26 address to unilaterally announce the start of a bold new easing initiative,” said Neal Soss, an economist at Credit Suisse, wrote in a report. “But we are looking for the chairman to hint strongly that further monetary policy accommodation is on its way — with the most likely candidate being an extension of the maturity structure of the Fed’s current $1.6 trillion Treasury portfolio. Other easing options include expanding the Fed’s balance sheet through additional asset purchases and lowering the 0.25 percent interest rate that the Fed pays on bank reserves.”

Analysts at Brown Brothers Harriman said in a note that the “market sentiment is improving on the hopes of a policy response from the Fed.”

By Friday, the Standard Poor’s 500 index had fallen 18 percent from its recent peak on April 29, close to bear market territory, which is officially defined as a peak to trough drop of 20 percent.

Many investors still remained nervous about the economic slowdown and whether Europe’s policy makers can get ahead of their debt problems, which have been a special drag on some of the Continent’s banks.

Last week’s negative sentiment about the United States economy was spurred by a signal of weak manufacturing activity from a survey by the Philadelphia Federal Reserve, and by stronger than expected inflation numbers.

But some analysts said Monday that the big sell-offs now presented a buying opportunity for investors.

“We suspect that the recent market downdraft will eventually be viewed as a buying opportunity for those who are willing to look beyond the most recent data point,” Barclays Capital analysts said in a research note.

It was in Jackson Hole last year that, faced with economic slowdown, Mr. Bernanke signaled a second round of large-scale bond purchases, or quantitative easing, called QE2 for short. Following the announcement of the program, stocks rose 28 percent between August and February this year.

But as the economy has slowed again this year, investors raised new questions about whether the Fed has done enough to fix problems in the economy. Earlier this month, the Fed made the extraordinary pledge to keep short-term interest rates close to zero until the middle of 2013. But some in the markets expect it may even do more at Jackson Hole.

“No one in America is complaining that interest rates are too high; the country’s problems are not monetary in nature,” wrote Mr. Soss. “Nonetheless, we would not expect Fed officials to stand idly by as cyclical economic momentum fizzles, and high unemployment takes on increasingly structural characteristics.”

In Europe, where losses in recent sessions have been as severe as in the United States, stocks were mixed. In Britain, the FTSE 100 was up 1.1 percent. In Germany, the DAX was down 0.1 percent. The French market index, the CAC 40, was 1.1 percent higher.

As Libyan rebels advanced in Tripoli, oil prices fell as investors anticipated a return to international oil markets of one of the world’s biggest oil producers.

North Sea oil prices were falling as Col. Muammar el-Qaddafi’s grip on power appeared to be dissolving; Brent crude fell about $1.41 to $107.21 a barrel, while U.S. crude oil prices fell 9 cents to $82.17. Shares of the Italian oil company Eni, which was the biggest foreign oil producer in Libya, were up 6.3 percent in late trading Monday.

Still, some analysts warned that many investors remained nervous as the sovereign debt crisis in Europe was still unresolved, and said it would not take much to push the markets back into negative territory.

“We’re just seeing a natural reaction after the sharp falls at the end of last week,” said Elisabeth Afseth, a fixed-income analyst at Evolution Securities in London. “But the situation is still very uncertain and fragile.”

Chancellor Angela Merkel of Germany reaffirmed her opposition to issuing bonds backed by all of the euro zone members as a way to fix the region’s sovereign debt crisis.

“The markets want to force us to do certain things,” she told the German television channel ZDF. “That we won’t do. Politicians have to make sure that we’re unassailable, that we can make policy for the people.”

The four weeks of declines in global stock markets have wiped trillions of dollars from investment portfolios, partly because of fears about a continued unwillingness by political leaders in Europe to take bold steps to tackle a sovereign debt problem.

“Risk aversion is still at acute levels,” Ashley Davies, an analyst in Singapore for Commerzbank, wrote in a note on Monday. “There is massive liquidity out there but few assets that investors feel truly comfortable with.”

Gold and silver continued to rise, and the Swiss franc and the Japanese yen weakened.

Earlier in the day, the Kospi index in South Korea fell nearly 2 percent, and the key index in Australia slipped 0.5 percent. In Japan, where policy makers kept up their barrage of comments aimed at damping the ascent of the yen, the Nikkei 225 average retreated 1 percent.

But in Hong Kong, the Hang Seng index rose 0.4 percent. The Sensex in Mumbai climbed 1.2 percent.

Julia Werdigier contributed reporting from London and Bettina Wassener contributed from Hong Kong.

Article source: http://www.nytimes.com/2011/08/23/business/daily-stock-market-activity.html?partner=rss&emc=rss

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