Pessimism undoes early stock gains
NEW YORK » A late-day selloff left stocks mixed yesterday as investors put aside their enthusiasm over acquisitions and evidence of a moderating economy and cashed in profits from an early advance.
Reports showing an unexpected slowdown in manufacturing growth and an upswing in construction spending fed optimism about the economy's health and a possible end to the Federal Reserve's interest rate hikes. The early buying sent the Dow Jones industrials up 138 points and had the Standard & Poor's 500 and Nasdaq composite indexes near multiyear highs.
The market's momentum waned late in the day as nervous investors chose to play it safe and take money out of stocks and bonds.
The mixed economic news nonetheless showed that the economy, while tapering, continues to move forward at a healthy pace, said Jay Suskind, head trader at Ryan, Beck & Co. That bode well for investors anxious about indications from the Fed last week that it will keep lifting rates to restrain economic growth and inflation.
"I think it's the same old story: The economy certainly surprises us by how resilient it is," Suskind said, but added that most on Wall Street are focused on employment data later this week.
Yesterday's acquisitions were led by General Motors Corp.'s deal to sell a majority stake in its auto financing unit for $14 billion. Lucent Technologies Inc. also agreed to be acquired by Alcatel SA for $13.4 billion in stock.
At the close of trading, the Dow gained 35.62, or 0.32 percent, to 11,144.94. The Dow finished the first quarter Friday with a 3.66 percent advance.
Broader stock indicators were mixed. The S&P 500 rose 2.98, or 0.23 percent, to 1,297.81, while the Nasdaq dropped 3.05, or 0.13 percent, to 2,336.74.
Bonds extended last week's losses, with the yield on the 10-year Treasury note edging up to 4.87 percent from 4.86 percent late Friday. The dollar was mostly lower against other major currencies, and gold prices rebounded.
Investors shrugged off an uptick in oil prices amid supply concerns related to political tension in Iran and Nigeria. A barrel of light crude rose 11 cents to settle at $66.74 on the New York Mercantile Exchange.
The Institute for Supply Management said its manufacturing index for March fell 1.5 points to 55.2, versus forecasts for a one-point rise. However, the index's prices paid component surged 4 points to 66.5, the highest level since November and an ominous sign for inflation.