Bargain hunting props up Dow
A spate of bargain-hunting boosted a sluggish market in late trading Thursday, pulling the Dow Jones industrial average back from below the 10,000 mark. But the buying seemed to lack conviction as investors remained worried about the economy’s health.
Many companies have reported strong earnings for the second quarter, indicating business conditions are good, but investors have focused instead on lower forecasts and concern about whether future earnings can support current share prices. Disappointing results from Microsoft Corp. after the bell only added to the market’s gloom.
Some analysts have attributed the current pattern of sideways trading to summer doldrums. But others warn that selling pressure is likely to increase if the downward trend continues.
“The fear of earnings not holding up in the second half of the year has put the bears in full control, and the market is basically testing the trading ranges,” said Peter Cardillo, chief strategist with S.W. Bach & Co. “Any close under the 10,000 level (on the Dow) will obviously indicate a psychological breakdown, and could induce more selling.”
The Dow Jones industrial average ended the day higher, up 4.20, or 0.04 percent, at 10,050.33 after falling as low as 9,946.88. The Dow last closed below 10,000 on May 24.
The broader gauges also finished higher after spending much of the session in negative range. The Nasdaq composite index gained 14.69, or 0.8 percent, to 1,889.06, ahead of Microsoft’s much-anticipated results. The Standard & Poor’s 500 index added 2.96, or 0.3 percent, to 1,096.84.
From a technical standpoint, the S&P 500 hit a milestone on Wednesday, when it fell below its 200-day moving average for the first time since March 2003. For professional investors, that was a caution flag, suggesting the upward trend that began more than a year ago might not be sustainable.
Helping the bears’ case, a closely watched gauge of future economic activity declined last month for the first time since March 2003, falling short of analysts’ expectations. The Conference Board said its Composite Index of Leading Economic Indicators dropped 0.2 percent in June, to 116.2, following three months of gains. Analysts had expected the index to remain flat.
The combination of technical signals and less-than-stellar economic news, along with gloomy corporate outlooks, created a negative feeling on Wall Street, although buyers emerged in the final hour of trading. With no real catalyst in sight to push the equity markets higher, many analysts believe there are more down days ahead.
Decliners outnumbered advancing issues by more than 3 to 2 on the New York Stock Exchange. Preliminary volume came to 1.67 billion shares, compared with 1.68 billion traded on Wednesday. The Russell 2000 index, which tracks smaller company stocks, was down 2.05, or 0.4 percent, at 546.52.
Overseas, Japan’s Nikkei stock average finished 1.3 percent lower Thursday. In Europe, France’s CAC-40 fell 1.8 percent, Britain’s FTSE 100 dropped 1.6 percent and Germany’s DAX index declined 2 percent.