U.S. Indexes Find Some Momentum
By DAVID JOLLY and BETTINA WASSENER
Tuesday’s bounce seemed to carry over into Wednesday.
Shares of the major exchanges rose Wednesday, following both Asian and European shares higher, as investors bought back equities that appeared cheap after two days of decline. But market sentiment remained fragile.
In late morning trading, the Dow Jones industrial average was 92.96 points, or 0.93 percent higher. The broader Standard & Poor’s 500-stock index rose 1.2 percent, and the technology heavy Nasdaq was up 1.6 percent.
In afternoon trading in Europe, the Euro Stoxx 50 index of euro-zone blue chips rose 2.4 percent, while the FTSE 100 index in London gained 2.6 percent. In Frankfurt, the DAX rose 2.1 percent and the CAC-40 rose 3 percent. The rally was broadly based, with the industrial, technology and financial sectors all advancing more than 2 percent.
Analysts said the rally was mainly because of investors seeking bargains after the sharp falls of previous sessions, rather than any fundamental change in mood.
David Thébault, head of quantitative sales trading at Global Equities in Paris, called the rebound “a reaction to overselling,” but “for the short term, I think we’re still headed lower.”
Tuesday’s late-day swing came after Washington lawmakers, including Representative Barney Frank, chairman of the House Financial Services Committee, suggested that they would not support a provision in the financial overhaul measure that required financial firms to spin-off their trading desks. On Tuesday, the S.&P. 500 ended the day flat while the Dow Jones industrial average slipped 0.2 percent, after sinking more than 2.5 percent earlier in the day.
On Wednesday morning, traders took in a better-than-expected report on American durable goods orders in April. Orders for manufactured goods rose 2.9 percent in April, more than twice the forecast.
In addition, the Commerce Department said reported that sales of new single-family homes rose 14.8 percent to a seasonally adjusted annual rate of 504,000 units. The April gain followed a 29.8 percent surge in March.“We have the impression that despite setbacks, Europe is moving toward a common response to the crisis and will get its budgetary problems in order,” Mr. Thébault said.
Investors have been unnerved this spring by the realization that the finances of some European governments were seriously out of kilter in a potentially unsustainable way. The resulting market fallout led the European Union and International Monetary Fund to put together a safety net this month of around $920 billion for countries that run into trouble paying their debts. The European Central Bank also agreed to help by purchasing private and sovereign debt.
Mr. Thébault pointed to lingering risks to the financial system, as evidenced by problems at savings banks in Spain, but added, “Europe is moving in the right direction.”
Dariusz Kowalczyk, chief investment strategist at SJS Markets in Hong Kong, wrote in a note that a “brief rebound is increasingly likely” in stocks, but that volatility would likely remain high and that risky assets would probably end the year below current levels.
Asian shares were modestly higher. The Tokyo benchmark Nikkei 225 stock average rose 0.7 percent, though the broader Japanese market was little changed, as evidence by a 0.1 percent decline in the Topix index. The Nikkei had sagged 3.1 percent Tuesday.
In Hong Kong, the Hang Seng index rose 1.1 percent, and in Shanghai the composite index rose 0.1 percent.
The dollar rose against other major currencies. The euro fell to $1.2265 from $1.2345 late Tuesday in New York, while the British pound fell to $1.4403 from $1.4408. The dollar rose to 90.38 yen from 90.23 yen.
Credit markets remained troubled. While the cost of insuring European blue chip corporate debt against default with credit default swaps fell, interbank lending rates continued to rise. The London interbank offered rate for three-month dollar loans between banks, known as Libor, ticked up to 0.53781 percent from 0.53625 percent Tuesday. While still far below the 5 percent witnessed at the height of the financial crisis in 2008, the rate has risen about 115 percent this year.
Despite the relatively calm performance on Wednesday, analysts said the underlying sentiment was one of continued nervousness about high government debt levels in Greece and other European countries.
There is also concern that the painful spending cuts and austerity programs introduced by many European governments, though necessary to reduce government deficits, could threaten the tentative recovery in Europe, which would indirectly hit Asia by dampening demand for Asian exports.
Adding to the jitters in recent weeks are concerns that the Chinese authorities’ efforts to rein in lending could slow down the country’s rapid growth more dramatically than intended.
“If growth slows significantly in China, that’s the end of the match,” Mr. Thébault said./graphics8.nytimes.com/images/global/word_reference/ref_bubble.png">http://graphics8.nytimes....reference/ref_bubble.png', sizingMethod='image'); MARGIN: -20px 0px 0px -20px; WIDTH: 25px; BACKGROUND: none transparent scroll repeat 0% 0%; HEIGHT: 29px; CURSOR: pointer" id=nytd_selection_button_wordReference class=nytd_selection_button title="Lookup Word" undefined='margin:-20px 0 0 -20px; position:absolute;background:url(http://graphics8.nytimes....inter;_background-image: none;filter:progid:DXImageTransform.Microsoft.AlphaImageLoader(src="http://graphics8.nytimes.com/images/global/word_reference/ref_bubble.png", sizingMethod="image");'>