NEW YORK (AP) - 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.
"The credit issues, the liquidity issues, are still there," said Ryan
Detrick, strategist at Schaeffer's Investment Research. "There's a dark cloud
over the market."
But 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.
Goldman fell $7.12, or 3.4 percent, to $201.51 after releasing its earnings
report, which showed a 2 percent profit gain but uneven results across the
investment bank's various units.
Best Buy rose 48 cents to $51.62 after the electronics retailer posted a
52-percent profit gain. However, the company issued a forecast that came in
below analysts' expectations.
The Commerce Department said housing starts and building permits fell last
month compared with October, bolstering investors' belief that the economy will
continue to feel the housing market's drag in the new year. Housing starts fell
3.7 percent to the lowest level in more than 16 years, while building permits
fell 1.5 percent to the lowest in more than 14 years.
The Fed revealed a plan Tuesday to give people taking out mortgages new
protections against questionable lending practices -- particularly to subprime
borrowers, whose inability to keep up with their loan payments has led to this
year's spike in foreclosures and credit crunch.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock
Exchange, where volume came to 1.49 billion shares compared with 1.44 billion
traded Monday.
The Russell 2000 index of smaller companies rose 15.00, or 2.03 percent, to
754.06.
The dollar was mixed against other major currencies, while gold prices
advanced.
Light, sweet crude fell 14 cents to $90.49 a barrel on the New York
Mercantile Exchange.
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.
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