Wall Street takes a breath after rally
NEW YORK » Wall Street paused after a huge two-session rally yesterday but closed mostly higher, holding on to almost all its gains even after disappointing reports on consumer sentiment and the housing market.
Stocks pulled past profit-taking that was due in part to the Conference Board's report that consumer confidence sank to a five-year low in March. The index has been weakening since July, and is closely watched to determine the future of consumer spending, perhaps the most critical part of the economy.
Meanwhile, the Standard & Poor's/Case-Shiller home price index indicated that U.S. home prices fell 11.4 percent in January, the steepest drop since data was first collected in 1987. The latest decline means prices have been growing more slowly or dropping for 19 consecutive months.
Volume was light, with many investors holding off any big moves while the market sought a direction; trading remained uneasy amid the ongoing uncertainty about the economy and credit markets. Still, the fact that stocks didn't suffer a huge pullback, which has been the market's pattern for months after a big gain, indicated that at least for the time being Wall Street seems more capable of handling bad news.
Stocks had charged higher in the days following the Federal Reserve's decision to aid investment banks and orchestrate a buyout deal for a near-collapsed Bear Stearns Cos. The Dow Jones industrials shot up nearly 450 points in the previous two sessions.
"There is a lot of cash on the sidelines right now, and they're really waiting to see if there's another shoe to drop," said Todd Leone, managing director of equity trading at Cowen & Co. "Bear Stearns has taken a lot of fear out of the market, and the Fed is doing what it can for the credit crunch, but I think there's still uncertainty."
The Dow fell 16.04, or 0.13 percent, to 12,532.60. The blue chip index was actually the laggard in yesterday's session -- the broader Standard & Poor's 500 and Nasdaq composite indexes had more robust gains.
The S&P rose 3.11, or 0.23 percent, to 1,352.99; the Nasdaq added 14.30, or 0.61 percent, to 2,341.05. The Russell 2000 index of smaller companies rose 3.99, or 0.57 percent, to 705.27.
Advancing issues led decliners by 2 to 1 on the New York Stock Exchange, where consolidated volume came to 3.99 billion shares from 4.37 billion on Monday.
Bond prices rose, regaining ground after a huge decline on Monday that accompanied the rally on Wall Street. The yield on the benchmark 10-year Treasury note fell to 3.49 percent from late Monday's 3.55 percent. The yield moved to 3.51 percent in after-hours trading.
The dollar was down against other major currencies, while gold prices rose.
Oil futures wobbled, with some investors selling on new worries about the economy and buying in response to the dollar's latest decline. Light, sweet crude rose 36 cents to settle at $101.22 a barrel on the New York Mercantile Exchange.
Monsanto Co. shares jumped almost 10 percent after the agricultural products company said earnings will be stronger than originally projected. Shares rose $10.29, or 9.9 percent, to $114.54, and also helped boost others in the sector.