US Stocks Rise As Investors Shrug Off Consumer Sentiment
AUGUST 12, 2011, 11:38 A.M. ET.
US Stocks Rise As Investors Shrug Off Consumer Sentiment Data
By Steven Russolillo
Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--U.S. stocks remained firm following a weaker-than-expected reading on consumer confidence, as investors braced for the end of one of the most volatile weeks in Wall Street history.
The Dow Jones Industrial Average, which saw most of its early gains melt in the immediate wake of the confidence data, was recently back up 109 points, or 1%, to 11252 in late morning trade, led by Walt Disney, which rose 3.8%. Hewlett-Packard gained 3.1% and Caterpillar rose 2.8%. A closing gain on Friday would be the index's first back-to-back rally since July 7.
The Standard & Poor's 500-stock index gained 6 points, or 0.5%, to 1178, led by industrial and health-care stocks. The measure hasn't had two-consecutive sessions of gains since July 22. The technology-oriented Nasdaq Composite rose 13 points, or 0.5%, to 2506.
Stocks swung after an indicator of consumer sentiment showed a sharp fall in August. The consumer sentiment index from Reuters/University of Michigan tumbled to 54.9 in mid-August, the lowest level since 1980 and down sharply from 63.7 in late July. Economists had expected the reading to ease only to 62.
"The market's doing reasonably well considering how bad that number was," said Paul Zemsky, head of asset allocation at ING Investment Management. "But we still think there's more to go on the downside as the effects of confidence start showing up in the economic data."
Consumer confidence data came after retail sales, an important indicator of consumer spending and typically a major driver of economic growth, rose 0.5% in July. Consumers spent more on gasoline, electronics and other merchandise, potentially easing concerns that Americans are pulling back.
"The data shows all the wheels aren't falling off the U.S. economy," said Seth Setrakian, co-head of U.S. equities at First New York Securities. "It's not great, but it's sluggish and consistent with the slow growth profile the economy has been exhibiting."
The market's recent moves this week are the wildest since late 2008 during the depths of the financial crisis. Investors are worried about a possible double-dip recession in the U.S. and the debt crisis spreading across Europe. The Dow surged 423 points on Thursday, marking the first time in the index's 115-year history that it has moved by more than 400 points in one direction or another for four consecutive trading days.
The big downward moves of late have been driven in large part by an exodus from stocks by mutual funds and pension funds. The big up days are largely being driven by a small number of bargain hunters and maneuvering by hedge funds.
European markets were broadly higher Friday, with the Stoxx Europe 600 also attempting its first two-day win streak in three weeks. European officials announced short-selling bans on some financial stocks in an effort to curb traders' abilities to profit when they decline.
"It's at best a temporary fix," Zemsky said. "Europe has a fundamental problem, not a short-selling problem. A short-selling restriction is like a band-aid on a really crushing wound."
Gold futures fell to $1,735 an ounce. The futures reached an all-time high of $1,817.60 an ounce in intraday trading Thursday before reversing ground to settle at $1,751.50 on the New York Mercantile Exchange, after the CME Group said it would raise margin requirements on gold contracts.
Crude-oil futures rose but held below $87 a barrel. The U.S. dollar lost ground against the euro and the yen.
In corporate news, J.C. Penney's fiscal second-quarter earnings were flat as the department-store operator posted lower sales on the exit of its catalog business. Shares fell 1.6%.
Nvidia reversed earlier gains and was recently down 0.7% after the graphics-chip maker reported second-quarter results and a third-quarter sales outlook that surpassed expectations.
Bally Technologies slumped 15% following a disappointing outlook for the current fiscal year, while MannKind shot up 21% after the company confirmed with the U.S. Food and Drug Administration the design of two clinical studies.
Elsewhere, Nordstrom rose 4.3% as second-quarter earnings rose 20% from a year ago. The upscale retailer also boosted its full-year earnings guidance.
-By Steven Russolillo, Dow Jones Newswires; 212-416-2180; steven.russolillo@dowjones.com
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