US stocks drift as European gloom returns

In this Sept. 20, 2012, file photo, Tru­lia co-founder and CEO Pete Flint, right, talks with trader Thomas Kay, cen­ter, on the floor of the New York Stock Exchange. Asian stocks mostly drifted lower Mon­day, Sept. 24, as investors’ grow­ing con­cerns about the shaky global econ­omy over­pow­ered any remain­ing opti­mism over cen­tral bank stim­u­lus efforts. (AP Photo/Richard Drew, File)

DANIEL WAGNER

AP Busi­ness Writer

U.S. stocks mean­dered side­ways Mon­day as fears about Europe over­shad­owed recent excite­ment about cen­tral banks’ efforts to boost the market.

Stocks opened lower, recov­ered by mid-afternoon to nearly flat and closed down modestly.

An index of busi­ness con­fi­dence in Ger­many, the biggest econ­omy in Europe, fell for a fifth straight month. Many econ­o­mists had expected it to at least remain flat. Some think Ger­many is headed for a recession.

The threat of the years-old Euro­pean debt cri­sis has seemed less imme­di­ate in recent weeks as cen­tral banks unveiled mea­sures aimed at encour­ag­ing invest­ment and boost­ing the global econ­omy. The Ger­man report reignited those fears.

Stocks had risen strongly in recent weeks as traders antic­i­pated, then received, help from the Fed­eral Reserve in the form of an open-ended bond-buying pro­gram. The Fed will buy $40 bil­lion of mort­gage bonds per month until the econ­omy has improved.

“It’s not unusual after big moves for the mar­ket to, in essence, go quiet and wait for the next cat­a­lyst,” said Quincy Krosby, mar­ket strate­gist with Pru­den­tial Finan­cial. The next cat­a­lyst, Krosby said, is third-quarter earn­ings, which com­pa­nies will begin to announce next month.

The Dow Jones indus­trial aver­age closed down 20.55 points, or 0.2 per­cent, at 13,558.92. The Stan­dard & Poor’s 500 index declined 3.26, or 0.2 per­cent, to 1,459.89. Its two strongest groups were util­i­ties and telecom­mu­ni­ca­tions, safer stocks that tend to do well in a weaker economy.

The Nas­daq com­pos­ite index dropped 19.18 points, or 0.6 per­cent, to 3,160.78. The Nas­daq is heavy in tech­nol­ogy shares, which were dragged lower by Apple.

As in the U.S., the con­cern in Ger­many is that an econ­omy on the rebound will be weighed down by the rest of the Euro­pean coun­tries, half of which are already in recession.

Germany’s econ­omy grew 0.3 per­cent in the sec­ond quar­ter from the pre­vi­ous quar­ter, but a num­ber of econ­o­mists now believe the coun­try will fall into a reces­sion in the sec­ond half of the year.

In the U.S., stocks have gone from under­priced to fairly priced, said Doug Cote, chief mar­ket strate­gist at ING Invest­ment Man­age­ment. If recent weak­ness in U.S. man­u­fac­tur­ing is any guide, he said, traders will be dis­ap­pointed next month by com­pa­nies’ quar­terly results.

“It will be a sea change — the first time in three years that we’ve had neg­a­tive earn­ings growth,” Cote said. He said China’s abrupt eco­nomic slow­down is adding to cor­po­rate America’s woes.

If that hap­pens, Krosby said, it could drive the mar­ket lower. With­out enough pos­i­tive sur­prises from com­pa­nies this quar­ter, the Fed pro­gram prob­a­bly won’t be enough to extend the rally, she said.

“There’s an uneasy feel­ing sur­round­ing the mar­ket,” she said.

In the U.S., traders are look­ing for more good news from the hous­ing mar­ket, which appears to be bounc­ing back after being a stuck in a rut for years. The lat­est data on new and pend­ing home sales will be released later in the week.

Lennar on Mon­day became the lat­est builder to post sur­pris­ingly strong earn­ings. A rise in orders and the num­ber of homes deliv­ered, adding to a big tax ben­e­fit, had the Miami home­builder qua­dru­pling prof­its. KB Home on Fri­day did almost as well, and hous­ing shares jumped on opti­mistic com­ments from its CEO, Stu­art Miller.

On Mon­day, Lennar closed down 55 cents, or 1.5 per­cent, at $36.96. KB Home fell 63 cents, or 4.1 per­cent, to $14.63.

Apple fell after sales of the new iPhone 5 missed ana­lysts’ tar­gets. The com­pany sold 5 mil­lion units in three days. Its stock fell $9.31, or 1.3 per­cent, to $690.79.

Unit­ed­Health Group was down slightly on its first day in the Dow, which shuf­fled its lineup of stocks to reflect health care’s grow­ing impor­tance in the econ­omy. Unit­ed­Health, the nation’s largest health insurer, replaces Kraft Foods in the Dow. Its stock fell 20 cents, or 0.4 per­cent, to $55.98.

Pere­grine Phar­ma­ceu­ti­cals Inc. stock col­lapsed after the can­cer drug devel­oper told ana­lysts they should not rely on recently dis­closed data about its lead prod­uct, a pro­posed lung can­cer treat­ment. The stock fell $4.23, or 78.5 per­cent, to $1.16.

The price of oil fell to around $92 a bar­rel, dragged down by con­cerns about weak­en­ing global growth and demand for crude. Bench­mark crude fell 96 cents, or 1 per­cent, to set­tle at $91.93 per bar­rel on the New York Mer­can­tile Exchange.

Stronger demand for safe invest­ments pushed the yield on the 10-year Trea­sury note down to 1.72 per­cent from 1.75 per­cent late Friday.

Posted by AP News on Sep 24 2012. You can follow any responses to this entry through the RSS Feed. Comments can be made below.