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Stock open higher ahead of Bernanke speech

March 21, 2009|Associated Press

NEW YORK — Wall Street closed out its first two-week gain in almost a year Friday -- barely.

After a mixed start, stocks veered lower in the afternoon as financial shares fell and investors collected profits on an advance that saw the Dow rise 14% over seven trading days. One reason for the market's pause: It simply ran out of upbeat economic and corporate news in the last two days.

The major indexes did eke out a gain for the week, jolted by the Fed's plans to buy hundreds of billions of dollars worth of debt securities in hopes of reviving lending. Stocks initially jumped on Wednesday when the plans were announced but then fell Thursday and Friday as investors became concerned that the huge injection of money into the economy could cause inflation.

Other markets had a tumultuous week as well. In just two days, the dollar fell 5% versus the euro and 3% versus the yen, and oil prices soared 7% Thursday above $51 a barrel to the highest level this year.

Many analysts believe stocks were due for some retrenchment.

"You get a run-up like that, you're going to get a pullback," said Doreen Mogavero, president of the New York floor brokerage Mogavero, Lee & Co.

On Friday, the Dow industrials fell 122.42, or 1.7%, to 7,278.38.

Broader stock indicators also lost ground. The S&P 500 index fell 15.50, or 2%, to 768.54, and the Nasdaq composite index fell 26.21, or 1.8%, to 1,457.27.

The stock market began to rally off of 12-year lows two weeks ago, after several banks reported being profitable in the first two months of the year. Even after Thursday's retreat, the Dow was up 13% from its lows, and the Standard & Poor's 500 index was up nearly 16%.

The question now is whether there will be enough good news in the coming days to maintain the rally.

Michael Binger, portfolio manager at Thrivent Investment Management in Minneapolis, said the market's overall move signaled that the economy was hitting bottom. He said it shouldn't be too difficult for stocks to resume their climb because expectations have fallen so low.

"I think the stock market is saying that fourth quarter of 2008 and first quarter of 2009 may be the trough in negative news," he said.

Bond prices slipped. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.62% from 2.59% late Thursday. The yield on the three-month T-bill rose to 0.19% from 0.18%.

The dollar rose against other major currencies. Gold prices slipped.

Analysts remained cautious about the market's rally, having seen other big advances crumble in the last year.

From late November until early January, stocks rose 20%, only to fall to new lows as fears grew about the health of the nation's biggest banks and the economy.

The Dow Jones industrial average closed the week up 54.40, or 0.8%, at 7,278.38.

The Standard & Poor's 500 index rose 11.99, or 1.6%, to 768.54. The Nasdaq composite index rose 25.77, or 1.8%, closing at 1,457.27.

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