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Stocks fall amid recession worries

July 07, 2009|Associated Press

NEW YORK — Stocks finished mixed Monday on conflicting signs about the economy. The Dow Jones industrials and the Standard & Poor's 500 indexes ended higher, erasing sharp slides early in the day.

Oil skidded to a five-week low on fears of weak demand, while an index of activity in the service sector rose in June to its best level in nine months.

The drop in oil and other commodities pushed shares of energy and raw-material producers lower.

Investors have become more cautious in recent weeks following a strong rally that began in March. Some traders fear they might have been too optimistic about how soon the economy might recover from a recession that began in December 2007.

"The markets are becoming more realistic," said Subodh Kumar, global investment strategist at Subodh Kumar & Associates in Toronto. "We can't snap our fingers and have recovery."

The Dow Jones industrial average gained 44.13 points, or 0.5%, to 8,324.87, and the broader Standard & Poor's 500 index rose 2.30 points, or 0.3%, to 898.72. The technology-heavy Nasdaq composite index fell 9.12 points, or 0.5%, to 1,787.40.

The Russell 2,000 index of smaller companies fell 0.6%.

Three stocks fell for every two that rose on the New York Stock Exchange.

Oil futures slid $2.68 to $64.05 a barrel on the New York Mercantile Exchange. Last week, oil hit an eight-month high above $73.

Among commodity producers, shares of Occidental Petroleum slumped 2.5%, while Exxon Mobil dropped 0.6%. Aluminum giant Alcoa sank 6.1%, while Freeport-McMoRan Copper & Gold fell 7.6%.

The Institute for Supply Management reported that its index of activity in the service sector rose to 47 in June from 44 in May, topping the 45.5 reading expected on average by economists polled by Thomson Reuters.

The relatively good showing, however, wasn't enough to assuage economic doubts that intensified last week in the wake of disappointing reports on jobs and consumer confidence in June.

Sound results at a Treasury Department auction of $8 billion in 10-year Treasury Inflation-Protected Securities, or TIPS, helped reassure investors that the government would be able to finance its spending plans to help revive the economy.

The yield on the benchmark 10-year Treasury note, however, edged up to 3.51%, from 3.5% late Thursday, and the yield on the three-month T-bill rose to 0.19% from 0.16%.

U.S. markets were closed Friday in observance of the Fourth of July.

Financial stocks ended higher after Moody's Investors Service said it might lift Brazil's debt rating.

"The possibility of a Brazilian upgrade is certainly a positive for the overall market, and financials in particular" because many U.S. banks have exposure to the South American country's debt, said Michael James, a managing director at Wedbush Morgan Securities in Los Angeles.

Goldman Sachs gained 2.1%, Bank of New York Mellon advanced 2.9% and JPMorgan Chase rose 1%.

American Express jumped 5.6% after an analyst upgraded his rating on the credit card company, saying it would be among the least affected by regulatory changes and that worries about bad debt are easing.

Among other market highlights Monday:

* Gold futures fell $6.70 to $924 an ounce. The dollar was mixed against other major currencies.

* Overseas, key stock indexes fell 1% in Britain, 1.2% in Germany, 1.1% in France and 1.4% in Japan.

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