Stock surge after 5 days of heavy selling

 

NEW YORK – Investors returned to the stock market Wednesday, sifting for bargains after five straight days of heavy selling that drove markets to levels not seen in more than 12 years.

A slightly better-than-expected report on the services sector helped push stocks higher. All the major indexes were up more than 1.5 percent.

nyc_stock1

The Institute for Supply Management, a trade group of purchasing executives, said that its services index fell to 41.6 last month from 42.9 in January. The number was slightly above Wall Street’s estimate of 41. Any reading above 50 signals growth, while a reading below 50 indicates contraction. 

 

Wall Street’s advance came as the Obama administration announced details of a program it says is designed to help as many as 9 million borrowers stay in their homes through refinanced mortgages or loans that are modified to lower monthly payments.

Investors also took a cue from overseas markets, which rallied amid optimism over a possible Chinese economic stimulus plan. Prices for oil and other commodities climbed amid the enthusiasm over China.

Still, the rebound in stocks is likely based more on bargain hunting than enthusiasm, analysts said, amid lingering pessimism about the economy.

“Everybody’s been beaten up so much in the last couple weeks, you’ve got to believe that people are gun-shy,” said Bill Stone, chief investment strategist at PNC Wealth Management. “There’s going to be a little bit of a lack of conviction this week particularly ahead of the Friday employment numbers.”

The Labor Department will release its unemployment figures for February on Friday. The monthly report has become one of the most watched indicators of the economy’s health, as rising unemployment means consumers spend less. In a possible sign of what to expect, the ADP National Employment Report said Wednesday its gauge of the labor market showed private sector employment fell by 697,000 in February, a bigger drop than expected.

Investors also are awaiting the Federal Reserve’s beige book, an assessment of the economy by region, to be released later Wednesday. 

 

The market has made attempts at a rally before, only to slump further as investors find little reason to hold on to stocks in an economy that has failed to show any signs of improvement.

“The question is will the initial bounce hold?” asked Peter Cardillo, chief market economist at brokerage house Avalon Partners. “We need to see clarity; we need to see confidence return to the marketplace.” 

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: