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Stocks recover following weak home sales report
NEW YORK -- Stocks recovered from an early slump and ended higher after traders picked through the market for beaten-down stocks.
The Dow Jones industrial average gained nearly 20 points Wednesday, its first gain in five days, after having been down as much as 102 points. The market opened lower following weak reports on new home sales and durable goods orders, renewing fears that the economic recovery is losing steam.
Buying interest picked up steadily in the afternoon, however, bringing the Dow back up above the 10,000 level. Traders willing to dip back into riskier assets also pared their holdings of Treasurys, which had been rallying in recent days on economic worries.
"There are some buyers today," said Albert Meyer, portfolio manager of the Mirzam Capital Appreciation Fund. Meyer said some investors might see the market as oversold following a four-day losing streak, which took 375 points off the Dow through Tuesday.
Investors started the day with more bad news about the economy. Sales of new homes fell last month to the lowest level on record, and durable goods orders grew only slightly last month, disappointing investors who had been hoping that the U.S. manufacturing sector would continue to pick up.
The back-and-forth trading pattern has been typical of the volatility seen on the market in recent weeks, which has been exacerbated by very low trading volumes as investors take summer vacations.
"We rally, we sell off. We rally, we sell off," said Sandy Mehta, principal and chief investment officer of Value Investment Principals. "It's just the nature of the market right now."
The Dow closed up 19.61 at 10,060.06
Broader market barometers also rose. The Standard & Poor's 500 rose 3.46 to 1,055.33, while the Nasdaq rose 17.78 to 2,141.54.
About three stocks rose for every two that fell on the New York Stock Exchange, where volume came to 1.1 billion shares.
Interest rates initially fell in the bond market following the disappointing economic data, but rose steadily throughout much of the day as traders exited some of their Treasury positions and became more willing to pick up riskier assets like stocks.
Oil prices also rose, in another sign that traders are less concerned about finding safe assets. Crude rose more than $1 off its low for the day to settle at $72.52 a barrel.
The yield on the 10-year Treasury note fell as low as 2.42 percent during morning trading before climbing back to 2.53 percent. That yield helps set interest rates on mortgages and other consumer loans.
Overseas, Japanese shares fell again after the yen hit a new 15-year high against the dollar and a nine-year high against the euro. The high yen hurts profitability at major Japanese exporters. Japan's Nikkei stock average fell 1.7 percent. European markets were also lower.