MARKET SNAPSHOT: Stocks Trading Flat After Selling Spree, Italy
Written on July 10, 2011 by Maragaret Harrison
SAN FRANCISCO — U.S. stocks fluctuated between minor gains and losses Tuesday after a successful Italian debt sale took the edge off worries of an imminent sovereign default in Europe.
The Dow Jones Industrial Average was down 1.44 points, or less than 0.1%, at 12,504.32. Shares of Cisco Systems Inc. led with a 2.3% gain on speculation the tech company may cut 5,000 jobs.
Lagging on the Dow were shares of Intel Corp., which fell 1.6%.
Shares of Dow component Alcoa Inc. moved down 0.2% after reporting financial results late Monday. Excluding charges, the aluminum producer’s second-quarter income from continuing operations was a penny short of expectations.
The S&P 500 index was up 1.81 points, or 0.1%, at 1,321.30, with financials and utilities leading the index’s 10 subsectors.
The Nasdaq Composite fell 6.51 points, or 0.2%, to 2,796.11.
Ahead of the opening bell, Italy sold $9.4 billion in 12-month bills to respectable demand, though at higher yields.
U.S. stocks looked to be stabilizing after a rocky Monday session as soaring bond yields in Spain as well as Italy posed the risk that a potential default by Greece would create a mass exodus from other European countries’ debt. The Dow lost 151 points Monday to close at 12,506, its lowest close since June 30.
“The intensity of selling over the last few days was so high that now you’re getting some short-term exhaustion,” said James Dailey, chief investment officer at Team Financial Managers.
Dailey called sovereign-debt problems in Europe a “sideshow” compared with the slowdown in the global economy, which he expects will continue until the end of the year.
“The market is beginning to realize that Italy is not Greece,” said Peter Cardillo, chief market economist at Avalon Partners. “There’s been too much exaggeration over Italy. The market wants to move higher.”
Late Monday, Eurogroup finance ministers said they would seek ways to prevent Greece’s sovereign-debt problems from spreading to the rest of Europe even if that meant lengthening the maturities of loans or lowering interest rates — measures that ratings agencies would consider to be a technical default.
Cardillo said that ministers are trying to get the right deal together so markets begin to calm, and that a technical default on Greek debt may be the way out if that’s what stops contagion.
Closer to home, minutes from the last meeting of the Federal Open Market Committee will be released at 2 p.m. Eastern Time, offering insights into the state of the U.S. economic recovery.
In its June statement, the policy-setting arm of the Federal Reserve characterized the recovery as “continuing at a moderate pace, though somewhat more slowly than the committee had expected.”
Dailey expects the FOMC minutes will echo their position of the last four weeks but pivot toward more stimulus measures as growth in U.S. gross domestic product falls below their already-diminished forecasts.
On the New York Stock Exchange, advancers outnumbered decliners slightly with 402.5 million shares trading hands as of 1:10 p.m. Eastern.
In other economic data, the Commerce Department reported the U.S. trade deficit in May surged 15.1%, largely due to the increased cost of oil imports.
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