Stocks advanced modestly Tuesday after Wall Street shrugged off a sharp drop in orders for manufactured goods and took comfort in the first gain in existing home sales in eight months.
NEW YORK (AP) — Stocks advanced modestly Tuesday after Wall Street shrugged off a sharp drop in orders for manufactured goods and took comfort in the first gain in existing home sales in eight months.
The gains came after investors had little reaction to comments from Federal Reserve Chairman Ben Bernanke that he remains concerned that inflation or a steeper-than-expected decline in the housing market could harm an already slowing economy. In the speech, which included Bernanke’s most extensive comments on the economy since this summer, he said inflation remains higher than he would like but that it should fall as the economy cools.
The Commerce Department’s report that orders for durable goods fell 8.3 percent in October – the largest drop in more than six years – earlier stoked concerns that the economy is slowing at too fast a pace. But a report from the National Association of Realtors showing a slight uptick in home sales lent support to the market although it also revealed that the median selling price fell by the steepest level on record last month.
The market’s muted response followed its worst session in more than four months on Monday. John Zielinski, a portfolio manager at Neuberger Berman, contends the market’s plunge was overblown and that investors could be seeing lower-than-usual liquidity given that for many brokerages, Thursday is the end of their fiscal year.
“The moves seem to be a little bit exaggerated based on the data points we’re seeing,” he said.
According to preliminary calculations, the Dow Jones industrial average was up 14.74, or 0.12 percent, at 12,136.45, after falling 158 Monday.
Broader stock indicators also rose. The Standard & Poor’s 500 index was up 4.82, or 0.35 percent, at 1,386.72, and the Nasdaq composite index rose 6.69, or 0.28 percent, to 2,412.61.
Bonds rose, with the yield on the benchmark 10-year Treasury note falling to 4.50 percent from 4.53 percent late Monday. The yield on the 10-year note had fallen to a nine-month low following the durable goods report. The dollar fell against other major currencies, while gold prices fell.
Light, sweet crude rose 67 cents to $60.99 a barrel on the New York Mercantile Exchange. Rising oil prices helped push stocks lower Monday.
That markets essentially held their ground Tuesday left some investors hoping that Monday’s pullback was a healthy consolidation following a sharp run-up in stocks in recent months and not a sign that the economy was fraying. The drop Monday, though unnerving to some investors, still leaves the major indexes with impressive performances for the year, with the Dow up about 13 percent, the S&P up 9 percent and the Nasdaq up 10.7 percent.
“The markets over the last few months have gone pretty far,” Zielinski said. “Sometimes the news doesn’t have to be terrible to get people a little skittish. Today, maybe reality has set in and you’ve got some bargain hunting.”
Doug Sandler, chief equity strategist at Wachovia Securities, likens investors behavior in the final month or so of the year to a person trying to steer a car while sitting too close to the windshield. Every move, he says, is exaggerated.
“You’ve got so many portfolio managers that are cognizant of where they stand for the year that if market moves they jump on it regardless of the direction,” he said.
He contends Wall Street is less concerned with economic data and is simply trying to ride out the rest of the year. “I think people who are managing portfolios try not to get hurt in the last month of the year.”
Given the barrage of economic news and comments Tuesday, investors seemed little moved by an unexpected drop in the consumer confidence. The Conference Board, a private research group, reported that the figure for November fell to 102.9 in November from a revised reading of 105.1 in October. Analysts had been expecting a reading of 106.
The durable goods report, the third in the past four in which orders have declined or been flat, stirred concern that perhaps the Fed’s course of rate hikes and, more recently, pauses, hasn’t been as successful as hoped in bringing the economy in for a soft landing. The figure was lower in part because of a spike in orders in September for commercial aircraft. The central bank raised short-term interest rates 17 times starting in 2004 before leaving rates unchanged at its last three meetings.
In corporate news, ServiceMaster Co. rose $1.20, or 10.2 percent, to $13.10 after the provider of lawn-care and pest-control services announced it is considering selling itself. The company has retained several investment banks to explore the possibility.
Quicksilver Resources Inc. gained $2.07, or 5.3 percent, to $41.47 after a Goldman Sachs analyst raised his rating on the independent natural gas and oil producer to “Buy” from “Neutral.”
Manitowoc Co., which makes construction equipment, fell $1.77, or 3.1 percent, to $55.80 after its profit forecast disappointed Wall Street.
DayStar Technologies Inc. rose 9 cents to $5.90 after the maker of cells for collecting solar power named Stephan DeLuca chief executive. He replaces company founder John R. Tuttle, who will remain chairman.
The Russell 2000 index of smaller companies rose 2.72, or 0.35 percent, to 774.82.
Advancing issues outnumbered decliners by about 2 to 1 on the New York Stock Exchange, where volume came to 1.59 billion shares, compared with 1.6 billion traded Monday.
Overseas, Japan’s Nikkei stock average closed down 0.19 percent. Britain’s FTSE 100 closed down 0.40 percent, Germany’s DAX index fell 0.26 percent, and France’s CAC-40 was down 0.05 percent.