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Stocks Come Off the Mat

Robert Holmes

Stocks in New York overcame an ugly start to finish only modestly lower Thursday as an upbeat factory report helped entice buyers to the market.

The major indices dropped sharply at the open after new selloffs overseas and found enough strength to ever-so-briefly edge in to positive territory late in the day. After a short stay in the green however, shares retreated back below the flat line.

The Dow Jones Industrial Average finished with a loss of 34.29 points, or 0.28%, at 12,234.34. At their worst, the industrials sank more than 200 points.

Of the Dow's 30 components, 20 finished negative. Citigroup (C) was the best performer, up 1.4%, while Intel (INTC) slumped 1.4%.

The S&P 500 erased most of its earlier loss and ended lower by 3.65 points, or 0.26%, at 1403.17. The Nasdaq Composite shed 11.94 points, or 0.49%, at 2404.21.

"We've stopped the bleeding, and now we're just trying to regain a sense of calm," said Paul Nolte, director of investments with Hinsdale Associates. "Now, we're tied to all of the markets overseas, and we'll be constantly watching them."

Roughly 3.89 billion shares changed hands on the New York Stock Exchange. Decliners beat advancers by a 10-to-7 margin. Volume on the Nasdaq reached 2.80 billion shares, with losers outpacing winners 2 to 1.

Most of the selling pressure was relieved at 10 a.m. EST after the Institute for Supply Management said its manufacturing index for February rose to a reading of 52.3. Economists had expected the index to advance to 50 from January's 49.3.

Numbers above 50 represent an expansion in factory activity, while those below the mark point to a contraction.

Even though the major indices bounced from session lows following the ISM data, the Dow remains lower by 553 points, or 4.3%, from its all-time closing high set last week. The index is also down by 229 points, or 1.8%, for the year.

Meanwhile, the S&P 500 has fallen 3.9% since its six-year high last week and 1.1% for the year. The Nasdaq is down 4.8% from its 2007 high, but is off only 0.5% for the year.

The erratic trading in the U.S. followed another decline in Asia and suggested that the effects of the plunge in global equities two days ago remains on the minds of investors. Tokyo's Nikkei lost 0.9%, Hong Kong's Hang Seng slid 1.6%, and China's Shanghai and Shenzhen 300 tumbled 2.8%.

Meanwhile, markets across Europe were generally weaker. Frankfurt's Xetra Dax was down 1.1% the Paris Cac 40 fell 1.1%, and London's FTSE 100 was off 0.9%.

On Wednesday, New York stocks stabilized after plunging during the prior session. The Dow gained 52.39 points, or 0.43%, to 12,268.63, but finished well below its highest level of the day.

The S&P 500 rose 7.78 points, or 0.56%, to 1406.82, and the Nasdaq was up 8.27 points, or 0.34%, to 2416.13.

"If Tuesday was just an aberration, then we should have gained back half of the loss," said Marc Pado, U.S. market strategist with Cantor Fitzgerald. "Being up 50 points [on the Dow] when we should have been up 200 or more means that the economic data and investor sentiment was worth 150 points of downside pressure."

"We had effectively wiped out all of the gains made since Dec. 4," added Pado. "There has been significant technical damage in this decline."

Little relief was found in the remainder of Thursday's economic data. The Commerce Department said that personal income rose a greater-than-expected 1% in January. Excluding food and energy, the personal consumption expenditure price index is now higher by 2.3% over the past year, outside of the Federal Reserve's comfort zone range of 1% to 2%.

Meanwhile, the Labor Department said that initial jobless claims rose by 7,000 to 338,000 last week. The less volatile four-week moving average increased by 7,500 claims to 335,250.

Treasuries were recently clinging to gains. The 10-year note was up 6/32 in price, yielding 4.55%, and the 30-year bond was gaining 7/32 to yield 4.67%.

Commodities were mixed. Crude oil reversed losses and was higher by 21 cents, finishing at $62 a barrel at the New York Mercantile Exchange, while gold was lower by $7.40 to $665.10 an ounce. Natural gas slipped 2 cents to $7.28 per million British thermal units.

On the corporate side, a battle could be brewing for Texas utility TXU (TXU). A report out of the U.K. said that Credit Suisse (CS) is trying to put together a debt deal that would fund a competing offer for the company. Earlier this week, Kohlberg Kravis Roberts and Texas Pacific said they would take over TXU for $45 billion. TXU added 31 cents, or 0.5%, to $66.50.

Oracle (ORCL) agreed to buy Hyperion Solutions (HYSL) for $3.3 billion, and both stocks were trading higher. Oracle gained 2.1% at $16.77, and Hyperion surged 20.4% to $51.57.

As for the day's earnings, Viacom's (VIA) quarterly results were better then expected, as were the numbers at Sears (SHLD). Viacom shed 2.4% to $38.61, and Sears slipped by 2.3% and closed at $176.07.

Elsewhere, Staples (SPLS) edged past estimates and boosted its dividend, and Ciena (CIEN) guided its revenue targets higher. Staples fell 2.6% to finish at $25.35, and Ciena dropped 10.1% to $28.28.

SunTrust Banks (STI) revised its fourth-quarter earnings results lower to $1.39 a share from $1.46 a share. The previous earnings data had matched the Thomson First Call consensus. Still, SunTrust finished with a gain 43 cents, or 0.5%, to $84.74.

On the research front, Lehman Brothers upgraded Apple (AAPL) to overweight from equal-weight. The stock added $2.45, or 2.9%, to $87.06.