By Dan Strumpf And Saumya Vaishampayan
Stocks bounced back from early losses as investors shrugged off
weak economic data from Japan and focused on indications that
Europe's central bank could enact additional stimulus measures.
The Dow Jones Industrial Average gained three points to 17638 in
midmorning trading, rebounding from a 28-point dip after the
opening bell. The S&P 500 index was little changed at 2040. The
Nasdaq Composite Index shed nine points, or 0.2%, to 4679.
The unexpected news that Japan's economy contracted 1.6% between
July and September deepened concerns among investors that growth in
major economies outside the U.S. is flagging. The contraction
follows a decline in gross domestic product of 7.3% in the prior
quarter, meeting one definition of a recession. On Monday, Japanese
stocks fell 3%, marking the biggest one-day point decline in
2014.
Still, Japan has long been grappling with economic woes, and
investors seem convinced the U.S. economy can hold up despite
Japan's contraction, said Rick Fier, director of execution services
at Conifer Securities.
"It's a big economy, but it's not really something that you're
going to change your investment thesis on," he said. "They've been
stuck in the mud for 25 years now."
Investors were also tracking comments Monday from European
Central Bank President Mario Draghi. The central bank chief said in
prepared testimony that the ECB would be willing to take additional
monetary stimulus measures to keep inflation from staying too low.
Such easing measures by central banks globally have been credited
with propping up financial assets like stocks in recent years.
European stocks recovered earlier losses, with the Stoxx Europe
600 index recently up 0.6%. Data released Friday showed the
continent's economy grew just 0.6% in the third quarter, further
fueling speculation that the ECB will take more dramatic actions to
revive the economy.
U.S. stocks have rebounded sharply from a slump that started in
mid-September, helped by a strong third-quarter earnings season and
continued signs of improving U.S. growth. Stocks rose last week,
with the Dow up 0.3% to 17634.74. The S&P gained 0.4% to
2039.82, hitting its 41st record close on Friday.
"The U.S. economy is still in very good standing," said Greg
Peterson, director of investment research at Ballentine Partners,
which manages $5.1 billion. Mr. Peterson said his firm holds large
positions in U.S. stocks, and is keeping its holdings in developed
markets overseas more limited.
The end of earnings season could once again turn the spotlight
back on overseas growth issues in Europe and Asia, said Peter
Cardillo, chief market economist at Rockwell Global Capital.
"If Europe continues to weaken and Asia continues to weaken,
[that is] going to eventually weigh on the U.S. economy," he
said.
In economic news, New York manufacturers said business
conditions improved slightly in November. The New York Fed's Empire
State business conditions index rose 10.16 from 6.2 in October,
according to economists surveyed by The Wall Street Journal. Later,
industrial production in October is expected to rise 0.2%.
In commodity markets, crude-oil futures fell 1.2% to $74.93 a
barrel. Gold futures were little changed at $1185 an ounce.
The yield on the 10-year Treasury note recently rose to 2.328%.
Yields rise as prices fall.
In corporate news, Pfizer Inc. shares fell 1%, weighing on the
Dow. Pfizer and Germany's Merck KGaA said Monday they will work
together to develop a new tumor treatment product. Pfizer lowered
its full-year earnings guidance because of the deal. Merck KGaA
isn't affiliated with the U.S.'s Merck & Co. Halliburton Co.
agreed to buy oil-field services company
Baker Hughes Inc. in a deal valued at $34.6 billion. Shares of
Halliburton fell 7%, while those of Baker Hughes jumped 12.4%.
Write to Dan Strumpf at daniel.strumpf@wsj.com and Saumya
Vaishampayan at saumya.vaishampayan@wsj.com
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