The Dow mounted an afternoon comeback on Tuesday, bouncing back from its worst selloff in three weeks, but the Nasdaq Composite ended in the red for the second-straight day amid a slide for tech stocks.
Today's Markets
The Dow Jones Industrial Average rose 50.34 points, or 0.60%, to 8469.11, the S&P 500 sank 0.89 points, or 0.10%, to 908.35 and the Nasdaq Composite dropped 15.32 points, or 0.88%, to 1715.92. The consumer-friendly FOX 50 tumbled 0.06 points, or 0.01%, to 667.90.
“I think we have a bit of tug of war going on between the longs and the shorts,” NSYE trader Ted Weisberg of Seaport Securities told FOX Business. “There’s no question the market is at an inflection point. We’ve had that huge move. Certainly the market is due for a correction.”
That tug of war sent the markets on a rollercoaster ride as stocks opened solidly higher only to sink back into the red for much of the day. Yet the selling was modest and appeared to lack conviction, allowing the bulls a chance to fuel a comeback despite an absence of new positive economic or earnings news.
“There really wasn’t any news [to spark the rally] but I don’t think the selloff was based on anything either,” said Michael James, senior equity trader at Wedbush Morgan Securities. “The up trend is still in place. The bulls are still in control.”
Defensive stocks were the biggest winners on the Dow, led by Pfizer (PFE) and Coca-Cola (KO). Still, almost half of the Dow's components ended in the red, including General Motors (GM) and General Electric (GE).
The Nasdaq Composite, which has rallied for nine-straight weeks, didn't see much late-day buying, ending with solid losses for the second session in a row. Tech stocks such as Yahoo! (YHOO) and Amazon.com (AMZN) declined modestly.
The mixed action on Wall Street comes after Monday's 156-point tumble on the Dow, the index's steepest pullback since April 20. Traders said to expect more of the same as the markets could give back some of a nine-week rally that has sent the Dow 2,000 points above its March low.
“I think we’ve come to a point where some give back should be expected,” said Dan Greenhaus, equity analyst at Miller Tabak. “Unfortunately, we can’t go up forever.”
The financial sector trimmed its losses late on Tuesday, giving the broader markets a boost. But Bank of America (BAC) saw its shares tumble as the bank became the latest to take steps to raise cash. BofA sold $7.3 billion of its shares in China Construction Bank in an effort to plug the $34 billion gap in its balance sheet, The Wall Street Journal reported.
The auto sector took a big hit on Tuesday as GM lost one-fifth of its depleted market value, ending at a 76-year low. The selloff came a day after six GM execs, including Bob Lutz, said they sold $315,000 worth of GM stock and liquidated their remaining holdings. GM is facing a June 1 deadline to restructure out of court and avoid a bankruptcy filing.
Meanwhile, Ford (F) sank nearly 18% after the auto maker unveiled plans to sell 300 million new shares in a public offering. The sale, which could raise about $2 billion and would be dilutive to current shareholders, comes as Ford tries to pay off its health obligations to the United Auto Workers union.
Energy stocks like Hess (HES) closed slightly higher after another wild day for crude oil, which briefly touched $60 a barrel for the first time since November before retreating. Crude settled at a six-month high of $58.85 a barrel, up 35 cents, or 0.60%.
Corporate Movers
Alpha Natural Resources (ANR) unveiled a $1.5 billion all-stock deal to acquire Foundation Coal Holdings (FCL) in a move that will create the third-largest coal producer in the U.S. The deal, which includes $530 million in debt, values Foundation at a 41% premium to its Monday closing price.
Chrysler LLC is expected to announce this week which of the myriad of suppliers it no longer plans to do business with, a source told FOX Business.The bankrupt auto maker is also expected to announce which of its 3,200 dealers it would like to keep later this week.
General Motors (GM) plans to notify individual dealers it plans to close by phone or mail by the end of this week, a source told FOX Business. All stand-alone Pontiac dealers and low volume enterprises are likely to be closed.
New York Times Co. (NYT) board member Scott Galloway approached Google (GOOG) co-founder Larry Paige about the search giant buying the company but was rebuffed, Fortune magazine reported. Media mogul David Geffen tried to buy Harbinger Capital Partners’ 19% stake in the company at market price but was rejected, the magazine reported.
Microsoft (MSFT) is developing a new 3-D videocamera for its Xbox 360 videogame console that will allow players to control games with the movements of their bodies and without a controller, the Journal reported. Separately, CEO Steve Ballmer downplayed reports the tech giant will buy German software firm SAP, calling the talk a "random rumor." The talk was sparked by Microsoft's $3.75 billion debt issue on Monday.
American International Group (AIG) CEO Edward Liddy plans to push back against Congressional critics. “Rampant, unwarranted criticism of AIG serves only to diminish the value of our businesses around the world,” Liddy plans to tell a House oversight committee Wednesday.
Citigroup (C) said its TARP committee approved the use of nearly all of its $45 billion in bailout cash for lending purposes. Citi announced $8.25 billion in new lending programs, including $5 billion to municipalities, universities and nonprofit hospitals.
General Electric (GE) closed sharply lower after JPMorgan Chase cut its 2010 earnings estimate on the conglomerate and said its finance arm needs $10 billion to $15 billion in extra cash. However, JPMorgan also boosted its price target on GE to $12 from $8.
Data Dump
The Commerce Department said the U.S. trade deficit widened to $27.58 billion in March as oil prices climbed. While the trade gap was smaller than expected, it represented the first widening in eight months.
Global Markets
European stocks tumbled for the second day in a row.London's FTSE 100 sank 0.22% to 4425.54, France's CAC 40 fell 0.54% to 3249.46 and Germany's DAX lost 0.26% to 4854.11.
In Asia, Japan's Nikkei 225 tumbled 1.62% to 9298.61 while Hong Kong's Hang Seng rose 0.38% to 17153.64. China's Shanghai Composite jumped 1.49% to 2618.17.
