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Wall Street opens lower after surge a day earlier

March 25, 2009|Associated Press

Stocks slumped Tuesday but held on to most of their gains from Monday's huge rally.

The Dow Jones industrial average shed 115 points, or 1.5%, a day after soaring 497 points, or 6.8%, its biggest gain since late October.

"We'll take that trading pattern any time," said Arthur Hogan, chief market analyst at Jefferies & Co., who said he went to work Tuesday anticipating that the Dow would drop as much as 2%.

Thomas J. Lee, an analyst at JPMorgan, said the market's ability to hang on to most of its rally was encouraging, but he added, "This has definitely been a show-me market."

Investors have been cautious about the rally that began more than two weeks ago. Stock indexes staged a comparable rally from late November to early January before tumbling to new lows on fears about the economy and banking system.

The Dow dropped 115.89 points, or 1.5%, to 7,659.97. The index fell in early trading, rose briefly in the afternoon, and then turned lower again.

Broader stock indicators also tumbled. The Standard & Poor's 500 index fell 16.57 points, or 2%, to 806.35, and the Nasdaq fell 39.25 points, or 2.5%, to 1,516.52.

The Russell 2,000 small-cap index tumbled 3.9%.

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

Before retrenching Tuesday, the Dow had gained 19% and the S&P had surged 22% since they hit 12-year lows March 9.

Recent reports on retail sales, housing starts and inflation have topped traders' bleak expectations. Last week, the Fed said it would buy long-term government debt to help drive down interest rates for home loans and credit cards. And the government sparked new hope Monday when it detailed plans for a mix of taxpayer and private money to help banks remove as much as $1 trillion in bad loans from their books.

The bulk of Tuesday's market retreat was in financial stocks, the sector that gained the most recently. Citigroup fell 3.8%, Bank of America dropped 7.4%, JPMorgan Chase sank 8.5% and American Express lost 3.8%. Those stocks, all of which are Dow components, had surged as much as 26% on Monday.

Treasury yields were mixed. The benchmark 10-year T-note finished at 2.65%, unchanged from late Monday.

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