Stocks close higher after shaky session
NEW YORK » Wall Street closed mostly higher yesterday as investors appeared relieved that more bad news didn't emerge about risky mortgages and shrinking credit markets. Investors seeking safety pressed into shorter-term Treasurys.
Stocks endured back-and-forth trading following a rally Friday, which came in response to the Federal Reserve's decision to lower its discount rate.
Brian Levitt, corporate economist at OppenheimerFunds Inc., said the Fed's move, while helpful, won't erase all the market's unease.
"Fed action certainly doesn't make unsound credit sound. It allows some confidence for the higher quality deals to get done. It's more psychological. It provides confidence that the Fed will be a stopgap and a lender of last resort."
Treasury bonds, which have rallied in recent weeks as investors fled to safe-haven securities, continued their move higher yesterday. Because bond prices move opposite their yields, the benchmark 10-year Treasury bond yields fell to 4.65 percent from 4.68 late Friday, while the shorter-duration notes such as the 3-year T bill saw yields fall sharply.
The Dow Jones industrials finished up 42.27, or 0.32 percent, at 13,121.35, after seeing 100-point swings higher and lower.
Broader indexes were mixed. The Standard & Poor's 500 index slipped 0.39, or 0.03 percent, to 1,445.55; the Nasdaq composite index rose 3.56, or 0.14 percent, to 2,508.59.
The Russell 2000 index of smaller companies rose 1.42, or 0.18 percent, to 787.45.
Advancing issues outweighed decliners by about 3 to 2 on the New York Stock Exchange, where volume fell to 1.54 billion shares -- typical of an August session -- from a heavy 2.48 billion shares traded Friday.
At the market open yesterday, the Fed also announced it injected another $3.5 billion into the banking system. The central bank has infused the market with nearly $120 billion of liquidity in recent weeks.
Light, sweet crude fell 90 cents to $71.08 on the New York Mercantile Exchange. Investors have been wary as Hurricane Dean has moved toward Mexico, where major oil companies have already begun battening down oil rigs in the Gulf of Mexico.
The dollar was mixed against major currencies, while gold prices rose.
This week will be light on economic reports, which makes it a bit more difficult for investors to assess what the Fed might do at its rate-setting meeting. In one economic reading that arrived yesterday, the Conference Board said its gauge of future economic activity moved slightly higher in July.
Thornburg Mortgage Inc. fell $1.54, or 10.2 percent, to $13.50 after the company said it sold $20.5 billion of its safest investments to raise enough cash to allow the mortgage lender to operate amid a crisis in the mortgage industry.
Lowe's Cos., the No. 2 U.S. home improvement chain, reported a second-quarter profit that surpassed Wall Street projections. Despite the slumping housing market, the company said it will open 40 stores during the current quarter, and believes sales will rise 6 percent for the year. Lowe's shares rose $1.63, or 6.1 percent, to $28.50.