Stocks erase advance after doubt emerges about prospects for Greece bailout; Dow adds 5 pointsBy Tim Paradis, AP
Thursday, March 25, 2010
Stocks give up steep gains on renewed Greece woes
NEW YORK — Renewed concern about Greece’s debt problems short-circuited the big stock market rally.
The Dow Jones industrial average closed Thursday with a gain of just 5 points after earlier rising to a new high for 2010. Broader indexes slipped.
The market’s advance fizzled after European Central Bank’s president Jean-Claude Trichet told French television that Europe must take responsibility for its financial problems. That raised concerns about when a rescue for Greece might come.
Officials from European nations were meeting late Thursday to discuss their economic problems, and a deal was finally announced late in the day.
Investors have been concerned for months that problems in Greece and other debt-strapped countries in Europe would spread and spoil a global economic rebound.
“Any time we see comments about it it seems to spook the market,” said Adam Gould, senior portfolio manager at Direxion Funds in New York, referring to Greece’s financial problems. He said traders still expect Greece will get a bailout but the questions about how unnerved investors. “It’s more the uncertainty.”
The concerns about Greece weakened the euro and raised demand for the dollar. The climb in the dollar hit prices of commodities like energy. That, in turn, hurt shares of energy and materials stocks.
The worries about Greece and tepid demand at a Treasury Department bond auction for a third straight day overshadowed early enthusiasm about corporate news. Stronger earnings and a higher forecast from retailer Best Buy Co. and a better-than-expected outlook from wireless chip maker Qualcomm Inc. lifted the market in morning trading.
The companies’ reports raised hopes that consumer spending will increase. Higher sales of flat-panel TVs, laptop computers and smart phones are welcome signs because consumer spending is the biggest driver of the economy.
Stocks have been climbing with little interruption since early February. The move higher has been largely due to economic reports showing slow but steady improvements in the economy. Major stock indexes are at their highest level in about 18 months.
Burt White, chief investment officer for LPL Financial in Boston, said growing confidence in the economy is deserved but that stocks have been rising too quickly on light trading volume. That signals that relatively few traders have been generating the gains. That also leaves stocks susceptible to sudden slides if more skeptical investors return to the market.
“This market is easier to move because a few buyers are doing it unopposed,” White said. “This comet that’s kind of shooting higher is slowly every day beginning to kind of lose some momentum.”
The Dow rose 5.06, or 0.1 percent, to 10,841.21. It has risen in 16 of the past 20 days.
The Standard & Poor’s 500 index fell 1.99, or 0.2 percent, to 1,165.73, while the Nasdaq composite index fell 1.35, or 0.1 percent, to 2,397.41.
Stocks fell Wednesday after a credit rating agency lowered its rating on the debt of Portugal. That raised concerns similar to the ones that took down the advance Thursday. Investors worried that a default by Portugal would trigger a wave of losses for investors.
Bond prices fell again after a third straight auction for government debt drew less interest than in past months. That is a worry for investors because Washington could have to boost interest rates to entice buyers. Doing so could risk hurting the economy by driving up borrowing costs.
The government sold $32 billion in seven-year notes Thursday amid tepid demand. Bond prices had tumbled on Wednesday following another weak auction, and a sale of Treasurys on Tuesday also disappointed investors.
The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to its highest level in nine months. It climbed to 3.88 percent from 3.86 percent Wednesday.
The dollar rose against most other major currencies.
Crude oil fell 8 cents to settle at $80.53 per barrel in the New York Mercantile Exchange. Gold rose.
Best Buy rose $1.48, or 3.6 percent, to $42.66, while Qualcomm rose $2, or 5 percent, to $42.19.
Anadarko Petroleum Corp. was among the energy stocks that fell. The stock lost $1.61, or 2.3 percent, to $68.75. Meanwhile, Newmont Mining Corp. fell $1.37, or 2.8 percent, to $48.35.
Three stocks fell for every two that rose on the New York Stock Exchange, where consolidated volume came to 5.7 billion shares, compared with 4.8 billion Wednesday.
The Russell 2000 index of smaller companies fell 4.58, or 0.7 percent, to 679.10.
Britain’s FTSE 100 gained 0.8 percent, Germany’s DAX index rose 1.6 percent, and France’s CAC-40 climbed 1.3 percent. Japan’s Nikkei stock average rose 0.1 percent.
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