Stocks surge, lift­ing Dow back over 10,000 af­ter weeks of heavy sell­ing

In­crease in buy­ing doesn’t in­di­cate more op­ti­mistic in­vestors, ex­perts warn

Austin American-Statesman - - BUSINESS - By Tim Par­adis

NEW YORK — The Dow Jones in­dus­trial av­er­age climbed back above 10,000 on Wed­nes­day af­ter in­vestors had sec­ond thoughts about the heavy sell­ing go­ing on in the stock mar­ket dur­ing the past two weeks.

The Dow rose 275 points as stocks soared, the mar­ket’s first back-to-back ad­vance since mid-June and the first close above the psy­cho­log­i­cal bench­mark of 10,000 since June 28. But an­a­lysts warn that the buy­ing doesn’t mean that in­vestors are more op­ti­mistic. They said that there wasn’t a sin­gle cat­a­lyst be­hind the move and that it looked like a case of in­vestors scoop­ing up stocks that had be­come cheaper af­ter heavy losses. The Dow had fallen 7.3 per­cent over two weeks.

“It’s just more of a re­ac­tion to a lit­tle bit too much negativity,” said Marc Har­ris, co-head of global re­search for RBC Cap­i­tal Mar­kets in New York.

The Dow and broader in­dexes gained more than 2 per­cent. Trad­ing vol­ume was light, how­ever, sig­nal­ing that many skep­ti­cal in­vestors were stay­ing out of the mar­ket. In­ter­est rates rose as some in­vestors dumped Trea­surys in fa­vor of riskier as­sets like stocks.

Wed­nes­day’s gains fit a pat­tern of volatil­ity that be­gan in late April, when the Dow be­gan tum­bling from its 2010 high of 11,205.03. The Dow had fallen 13 per­cent since then, and the long slide in­cluded many triple-digit

moves.

The pro­tracted drop be­gan on con­cerns that debt prob­lems in Greece and other Euro­pean coun­tries would sti­fle the con­ti­nent’s re­cov­ery and even­tu­ally the re­cov­ery in the U.S. But in the past few weeks, stocks have been tum­bling on signs that the do­mes­tic re­bound is slow­ing. Some traders were sell­ing on fears that the coun­try is headed back into re­ces­sion. They were also buy­ing Trea­surys so they could put their money into a safe place.

Jack Ablin, chief in­vest­ment of­fi­cer at Har­ris Pri­vate Bank in Chicago, said a so-called dou­ble dip is un­likely, but the idea of one is scary be­cause the govern­ment wouldn’t have many op­tions to re­vive the econ­omy a sec­ond time.

“When you’re driv­ing around on a spare tire, you’re on the look­out for nails,” he said.

There were no eco­nomic re­ports to in­flu­ence the mar­ket Wed­nes­day, but a se­ries of re­ports ex­pected to­day may pro­vide some in­sight into con­sumers’ be­hav­ior. The gov­ern- ment’s weekly re­port on job­less claims is due out, and re­tail­ers will re­port June sales re­sults. In­vestors will be look­ing for any signs that lay­offs are slow­ing and that con­sumers are feel­ing bet­ter about spend­ing.

The mar­ket’s other big con­cern is up­com­ing earn­ings re­ports. In­vestors want to know whether com­pa­nies are also see­ing busi­ness slow, and if they’re chang­ing their fore­casts for the com­ing quar­ters.

Ablin said he didn’t ex­pect Wed­nes­day’s bounce to con­tinue be­cause in­vestors are anx­ious about the hun­dreds of com­pany re­ports on tap.

“I don’t think any in­vestor wants to com­mit one way or an­other with the whole string of earn­ings an­nounce­ments” ahead, he said.

The Dow rose 274.66, or 2.8 per­cent, to 10,018.28 on Wed­nes­day. The Dow rose 57 points Tues­day. The in­dex hasn’t risen two straight days since June 17 and 18.

The broader Stan­dard & Poor’s 500-stock in­dex and the tech-cen­tric Nas­daq com­pos­ite in­dex both rose 3.1 per­cent.

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