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Dow mixed; investor malaise continues

Stephen Bernard | Hagadone News Network | UPDATED 14 years, 3 months AGO
by Stephen Bernard
| August 17, 2010 9:00 PM

NEW YORK - Stocks managed to break a four-day losing streak Monday by the slimmest of margins. Investors had no change of heart about the economy, however, and again poured money into the safety of U.S. Treasurys.

The Dow Jones industrial average fluctuated along with the other big market indexes throughout the day. The Dow closed down just over a point, but the other indexes had slight gains. There were more winners than losers on the New York Stock Exchange.

Investors were dealing with more downbeat economic news, but it wasn't bad enough to set off significant selling. A report on manufacturing in New York state fell short of forecasts and Japan became the latest country to show signs of slowing growth. The reports raised investors' concerns about the pace of the global economic recovery.

Analysts said Monday's short buying spurt was a pause following four days of losses that sent the Dow down almost 400 points.

"The market is really being controlled by (short-term) traders," said Mike Rubino, CEO at Rubino Financial Group in Troy, Mich. "The long-term investor doesn't appear to be anywhere in sight."

Without those long-term investors, trading is expected to remain erratic for the foreseeable future.

The Dow fell 1.14, or 0.01 percent, to 10,302.01. The Standard & Poor's 500 index rose 0.13, or 0.01 percent, to 1,079.38, while the Nasdaq composite index rose 8.39, or 0.4 percent, to 2,181.87.

The Nasdaq, which has fallen more than the other indexes, got a lift from technology company deals. Among them, Dell Inc. said it is buying 3Par Inc., a maker of data storage equipment, for about $1.13 billion.

Advancing stocks were ahead of losers by about 2 to 1 on the New York Stock Exchange, where consolidated volume remained extremely light at 3.15 billion shares, down from Friday's 3.35 billion. Many traders are on vacation. And those who are at their trading desks are making few moves in an uncertain economy.

Investors continued buying Treasurys, driving interest rates lower. U.S. government bonds are looking more and more appealing to investors wanting to find a safe place for their money as the economy cools and stocks drop.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.57 percent from 2.68 percent late Monday. Its yield is often used to help set interest rates on mortgages and consumer loans.

The yield on the 10-year note is near the level it last hit in March 2009 when stocks fell to a 12-year low.

"It's a sign of pessimism that investors accept that low a yield," said Joe Heider, principal at Rehmann Financial in Cleveland.

Japan said its economy grew just 0.1 percent in the second quarter, well below the 1.2 percent growth in the first quarter and short of expectations. The report follows signs last week that both the U.S. and Chinese economies are not growing as fast as earlier in the year.

Meanwhile, the Federal Reserve Bank of New York said manufacturing activity in the state rebounded slightly this month after falling sharply in July. Despite the modest gain, activity did not expand as much as had been forecast, which indicates that economic growth remains tepid.

The New York Fed's Empire State Manufacturing Index rose to 7.1 in August from 5.1 in July. Economists polled by Thomson Reuters forecast the index would rise to 8. It was 19.6 just two months ago.

Regional manufacturing reports have shown a broad slowdown in recent months. That's particularly discouraging because manufacturing provided the most consistent signs of growth during the first few months of the year.

The reports are the latest to indicate that the global economy is growing, but not as fast as it did during the first few months of 2010. The slowdown has concerned traders who were predicting growth to pick up during the second half.

"We're scared of our own shadows here," said Jamie Cox, managing director at Harris Financial Group in Richmond, Va. "We need to readjust our signs from above-trend growth. If not, we're going to be perennially disappointed."

News about the housing market was also discouraging. The National Association of Home Builders said its monthly index of builders' sentiment fell in August for the third straight month.

3Par rose $8.35, or more than 86 percent, to $18. Dell fell 5 cents to $11.96.

Lowe's Cos. said Monday its quarterly profit and revenue rose, though both measures fell short of forecasts.

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