Stocks rise after European Bank loans
NEW YORK – Stocks rose Tuesday after investors found solace in the European Central Bank’s $500 billion loan issuance, but the possibility of recession in 2008 made for a back-and-forth session.
The ECB’s massive 16-day tender supported the idea that the world’s central banks are working to revive demand in struggling areas of the credit market. The Bank of England also said it will offer additional reserves to lenders Tuesday, after the U.S. Federal Reserve on Monday auctioned off $20 billion in 28-day credit.
Few are calling the end of the credit crunch just yet, though, and the market’s seesaw movements on Tuesday reflected its uncertainty. Alongside U.S. government data showing that new home construction dropped in November to its lowest rate in more than 16 years, the central banks’ actions had a hard time galvanizing a market that remains anxious that the economy has further to fall.
“It’s very disconcerting that we’re getting central bank interventions for a problem that many were hoping would be a self-contained one,” said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co.
Meanwhile, cautious comments from Goldman Sachs Group Inc. and Best Buy Co. dampened some of the market’s enthusiasm over the companies’ better-than-expected quarterly earnings.
After several sessions of declines, the Dow Jones industrial average rose 65.27, or 0.50 percent, to 13,232.47, after gaining as many as 112 points, falling by 75 points, and then rebounding.
The blue chip index had lost 4 percent over the past week since the Fed’s decision last Tuesday to lower interest rates by a quarter point, which was less than many investors hoped.
Broader stock indicators also bounced back from a midday slump. The Standard & Poor’s 500 index rose 9.08, or 0.63 percent, to 1,454.98, and the Nasdaq composite index rose 21.57, or 0.84 percent, to 2,596.03.
Each of the three major stock indexes on Monday lost at least 1 percent due to concerns that prices could keep rising despite a weakening economy – a phenomenon called stagflation. Stocks have also been volatile due to the upcoming “quadruple witching” on Friday, when contracts expire for stock index futures, stock index options, stock options and single stock futures.
Government bonds rose Tuesday. The yield on the 10-year Treasury note, which moves opposite its price, slipped to 4.12 percent from 4.15 percent late Monday.
Overseas, Japan’s Nikkei stock average fell 0.27 percent, and Hong Kong’s Hang Seng index rose 0.51 percent. Britain’s FTSE 100 rose 0.02 percent, Germany’s DAX index rose 0.32 percent and France’s CAC-40 fell 0.10 percent.