An early rally faded on the stock market yesterday, leaving indexes down about three per cent for the week as worries resurfaced about a breakup of the euro. BlackBerry maker Research in Motion plunged after slashing its forecast for holiday sales. The Dow Jones industrial average closed down 2.42 points yesterday, less than 0.1 per cent, at 11,866.93. It had been up as many as 99 points after the Italian government won a confidence vote on austerity measures. It turned mixed around midday as Fitch warned that it might downgrade the debt of Italy, Spain and four other countries that use the euro.
Materials and industrial companies rose, signaling that traders expect the economic recovery to remain on track. Utilities, health care and consumer staples companies lagged the market as traders sold stocks that are considered to be safer when the economy is weak. The Dow Jones Industrial Average broke a three-day slump Thursday on news that claims for unemployment benefits plunged last week and measures of manufacturing in the Northeast improved dramatically. The Dow lost 360 points over the first three days of the week as investors questioned whether Europe’s agreement to closer co-ordinate fiscal policy would be enough to save the euro from a catastrophic breakup. Some analysts believe nervousness about Europe this fall and winter pushed stock prices lower than their fair value. Investment adviser Uri Landesman, president of Platinum Partners, expects stocks to rise into next year because of the growing likelihood that economic news will remain positive.
Landesman said the market is near the low end of its recent trading range, and a dose of positive news could set off a mini-rally. Any market moves next week could be sharp as trading volume thins out before the Christmas holiday, Landesman said. The Standard & Poor’s 500 index rose 3.89, or 0.3 per cent, to 1,219.65. The Nasdaq composite index rose 14.32, or 0.6 per cent, to 2,555.33 The Dow is down 2.6 per cent for the week; the S&P 2.8 per cent. The Nasdaq lost 3.5 per cent. The yield on the ten-year Treasury note plunged to 1.85 per cent from 1.93 per cent earlier yesterday after the government said consumer prices were unchanged last month, suggesting that inflation remains low. Low inflation makes bonds more attractive because it doesn’t diminish the buying power of the fixed return a bond provides over time.
AP
