US stocks recoup losses

Wall Street recovered from an earlier plunge to finish narrowly mixed today as investors attempted to rally from a week of losses fuelled by concerns that higher interest rates will strain the global economy.

Persistent inflation and rate worries pushed stocks substantially lower during the session, with the Dow Jones industrials dropping more than 173 points at midday. But bargain hunters entered the market late in the day and took advantage of relatively cheap stock prices.

The market’s comeback helped draw attention from rate increases by the European Central Bank, South Korea and India. This week’s signals that the Federal Reserve would sacrifice economic growth to keep boosting rates and stem inflation saddled US stocks and led steep declines in markets worldwide.

“The heavy trading volume today was a good indication that we were nearing the end of this decline,” said Peter Cardillo, chief strategist at S.W. Bach & Co. “I think the market is probably going to begin to stabilize over the next couple of days.”

Oil prices dipped following the death of Iraq’s main terrorist leader, and the US dollar gained ground against the Japanese yen. However, investors were kept on edge by an inversion of short- and long-term bond yields.

The Dow rose 7.92, or 0.07%, to 10,938.82. The Dow lost about 330 points across the last four sessions.

Broader stock indicators turned mixed. The Standard & Poor’s 500 index added 1.78, or 0.14%, to 1,257.93, and the Nasdaq composite index fell 6.48, or 0.3%, to 2,145.32.

Declining issues outpaced advancers by about 3 to 2 on the New York Stock Exchange.

A jittery bond market added to Wall Street’s uncertainty as short-term yields overtook long-term rates for the first time since March, a sign of weakening confidence in holding long-term debt. The yield on the 10-year Treasury note slid to 5.01% from 5.02% late on Wednesday, while the 2-year Treasury yield stayed flat at 5.01%.

Elsewhere, the US dollar jumped against the Japanese yen but was flat versus European currencies, and gold prices tailed off to about 615 an ounce. The death of the al-Qaida leader in Iraq and easing political tensions in Nigeria and Iran sent a barrel of light crude tumbling 47 cents to 70.35 on the New York Mercantile Exchange.

The lack of economic news this week left investors with virtually no direction on the economy and whether the Fed will prolong its programme of rate hikes at its June 28-29 policy meeting. Next week’s reports on wholesale and consumer prices should bring evidence of whether surging energy costs have driven up prices in other areas – the Fed’s chief reason for higher lending rates.

“The global anti-inflation theme has intensified in the last 24 hours,” said Alan Gayle, senior investment strategist for Trusco Capital Management. “It’s clearly a sign that central banks are very focused on inflation, and that they’re going to raise interest rates so both inflation and inflation expectations are contained.”

Investors brushed aside the day’s economic data. The Labour Department said first-time applications for jobless benefits fell by 35,000 to 302,000 last week, well below the 330,000 claims predicted by economists. Meanwhile, the Commerce Department said wholesale inventories grew 0.9% in April, almost twice the estimated 0.5% rise.

In corporate news, General Motors Corp. fell 16 cents to 24.83 after The Wall Street Journal reported that the automaker has made significant progress in restructuring the workforce at its former parts unit, Delphi Corp.

Intel Corp. and Advance Micro Devices Inc. faced losses and weighed on the tech sector after Citigroup analysts warned that an escalating price war among chipmakers would cut into the companies’ earnings. Intel lost 28 cents to 17.11, and AMD dropped 97 cents to 27.03.

McDonald’s Corp. said its worldwide same-store sales grew 5.5% in May, lifted by moderate gains in the United States, Europe and Asia. McDonald’s added 37 cents to 33.69.

The Russell 2000 index of smaller companies slid 0.25, or 0.04%, to 706.53.