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Early stock gains from Bernanke comments evaporate
Source: Agencies |
December 8, 2009, Tuesday
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Online Edition
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EVEN the prospect that interest rates will remain low couldn't bring out buyers in the stock market.
Stocks ended mixed yesterday after a brief afternoon gain that came when Federal Reserve Chairman Ben Bernanke said unemployment and other problems would hold the U.S. economy to "moderate" improvements and that rates are likely to remain low.
The comments pushed down the dollar because low interest rates make the currency less attractive. That gave a boost to stocks since a lower dollar can add to profits for U.S. companies that do business overseas. The market's gains evaporated later, however, as the dollar pared its losses.
Dan Deming, a trader with Stutland Equities, said there were simply too few buyers on a day with little new news to keep the upward momentum going.
"It just feels like it's drifting," he said. "The market feels tired."
The fatigue comes as investors find few answers to questions about what investments will be strong in 2010 after a big run in stocks and commodities this year. Many traders have closed their books on the year and are wondering whether slow improvements in the economy will be able to support more stock market gains next year.
The back-and-forth trading yesterday followed a brief spike in stocks Friday, when a strong jobs report for November provided one of the best indications yet that the economy is strengthening. The Labor Department said employers cut fewer jobs than at any time since the recession began at the end of 2007, while the unemployment rate dropped to 10 percent from a 26-year high of 10.2 percent.
Stocks had jumped Friday after the employment report but later gave up most of those gains as traders started to worry that the signs of recovery in the economy would lead to higher interest rates. Some analysts say the market overreacted in predicting that rates were due to rise, however.
"We have a slowly recovering economy," said Robert MacIntosh, chief economist at Eaton Vance Management. "I don't think you need to worry about the Fed changing their mind and raising rates anytime soon."
The Dow Jones industrial average rose 1.21, or less than 0.1 percent, to 10,390.11 after being up 54 points and down 29 points. On Friday, the Dow ended with a gain of 23 points after having been up as much as 151 points following the unemployment report.
The broader Standard & Poor's 500 index fell 2.73, or 0.3 percent, to 1,103.25, while the Nasdaq composite index fell 4.74, or 0.2 percent, to 2,189.61.
The dollar fell as against other major currencies as Bernanke spoke to the Economic Club of Washington, but those declines moderated in the afternoon, leaving the ICE Futures US dollar index down 0.2 percent.
Gold fell but ended well off its worst level. Oil dropped US$1.54 to settle at US$73.93 a barrel on the New York Mercantile Exchange.
Bond prices rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.43 percent from 3.48 percent late Friday.
Low interest rates and the resulting slide in the dollar have helped fuel the stock market's advance since March. The weak dollar has encouraged investors to buy stocks, commodities and other higher-yielding assets.
Tom Higgins, chief economist at Payden & Rygel Investment Management in Los Angeles, said stocks will still climb when the Fed raises rates because the move will be such a strong sign of an improving economy that investors will be willing to take on more risk.
Higgins doesn't expect rates will go up soon, however, because the economy still needs supports to build a sustained recovery after a long period of excess debt and too little savings.
"We're starting to pay for those past deeds and the government is providing us with a little bit of aspirin to help," he said.
In other trading, the Russell 2000 index of smaller companies rose 0.77, or 0.1 percent, to 603.56.
Falling stocks narrowly outpaced those that rose on the New York Stock Exchange, where volume came to 1.1 billion shares compared with 1.6 billion Friday.
Stocks ended mixed yesterday after a brief afternoon gain that came when Federal Reserve Chairman Ben Bernanke said unemployment and other problems would hold the U.S. economy to "moderate" improvements and that rates are likely to remain low.
The comments pushed down the dollar because low interest rates make the currency less attractive. That gave a boost to stocks since a lower dollar can add to profits for U.S. companies that do business overseas. The market's gains evaporated later, however, as the dollar pared its losses.
Dan Deming, a trader with Stutland Equities, said there were simply too few buyers on a day with little new news to keep the upward momentum going.
"It just feels like it's drifting," he said. "The market feels tired."
The fatigue comes as investors find few answers to questions about what investments will be strong in 2010 after a big run in stocks and commodities this year. Many traders have closed their books on the year and are wondering whether slow improvements in the economy will be able to support more stock market gains next year.
The back-and-forth trading yesterday followed a brief spike in stocks Friday, when a strong jobs report for November provided one of the best indications yet that the economy is strengthening. The Labor Department said employers cut fewer jobs than at any time since the recession began at the end of 2007, while the unemployment rate dropped to 10 percent from a 26-year high of 10.2 percent.
Stocks had jumped Friday after the employment report but later gave up most of those gains as traders started to worry that the signs of recovery in the economy would lead to higher interest rates. Some analysts say the market overreacted in predicting that rates were due to rise, however.
"We have a slowly recovering economy," said Robert MacIntosh, chief economist at Eaton Vance Management. "I don't think you need to worry about the Fed changing their mind and raising rates anytime soon."
The Dow Jones industrial average rose 1.21, or less than 0.1 percent, to 10,390.11 after being up 54 points and down 29 points. On Friday, the Dow ended with a gain of 23 points after having been up as much as 151 points following the unemployment report.
The broader Standard & Poor's 500 index fell 2.73, or 0.3 percent, to 1,103.25, while the Nasdaq composite index fell 4.74, or 0.2 percent, to 2,189.61.
The dollar fell as against other major currencies as Bernanke spoke to the Economic Club of Washington, but those declines moderated in the afternoon, leaving the ICE Futures US dollar index down 0.2 percent.
Gold fell but ended well off its worst level. Oil dropped US$1.54 to settle at US$73.93 a barrel on the New York Mercantile Exchange.
Bond prices rose, pushing yields lower. The yield on the benchmark 10-year Treasury note fell to 3.43 percent from 3.48 percent late Friday.
Low interest rates and the resulting slide in the dollar have helped fuel the stock market's advance since March. The weak dollar has encouraged investors to buy stocks, commodities and other higher-yielding assets.
Tom Higgins, chief economist at Payden & Rygel Investment Management in Los Angeles, said stocks will still climb when the Fed raises rates because the move will be such a strong sign of an improving economy that investors will be willing to take on more risk.
Higgins doesn't expect rates will go up soon, however, because the economy still needs supports to build a sustained recovery after a long period of excess debt and too little savings.
"We're starting to pay for those past deeds and the government is providing us with a little bit of aspirin to help," he said.
In other trading, the Russell 2000 index of smaller companies rose 0.77, or 0.1 percent, to 603.56.
Falling stocks narrowly outpaced those that rose on the New York Stock Exchange, where volume came to 1.1 billion shares compared with 1.6 billion Friday.
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