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A Dismal Quarter for Stocks Ends Quietly
Posted By: Investnow
Date: 3/31/08 at 1:55 p.m. EST
By THE ASSOCIATED PRESS
Published: March 31, 2008Wall Street closed a dismal first quarter with a moderate gain Monday, rising slightly after a reading on regional manufacturing came in better than expected.
The Chicago Purchasing Managers Index, considered a precursor to the Institute for Supply Management manufacturing survey on Tuesday, rose to 48.2 in March from 44.5 a month earlier. Economists had been expecting a reading of 47.3, according to Dow Jones Newswires. Though the reading topped forecasts, a figure below 50 nonetheless indicates a contraction in manufacturing activity.
But market reaction was likely not as enthusiastic as it might seem from gains by the major indexes. Volume was very light, which tends to skew price movements, and the final day of the quarter had some institutions buying more for show rather than on any conviction about the economy.
The Dow Jones industrial average rose 46.49, or 0.38 percent, to 12,262.89.
Broader stock indicators also rose. The Standard & Poor’s 500-stock index advanced 7.48 points, or 0.57 percent, to 1,322.70, and the Nasdaq composite index rose 17.92 points, or 0.79 percent, to 2,279.10.
It has been a difficult quarter on Wall Street, with continuing credit market losses for financial companies and the flagging economy wiping out investors’ appetite for stocks. While the market has seen several up days during the quarter, over all, the first-quarter trend was sharply lower.
Investors also examined a government plan to overhaul the way Wall Street is regulated. Wall Street appeared unmoved by a plan to reorganize oversight of Wall Street; details of the 218-page plan have been widely reported in recent days. It would give the Federal Reserve increased power to protect the stability of the entire financial system while merging day-to-day supervision of banks into one agency, down from five under the existing system.
A senior equity strategist for A. G. Edwards & Sons, Scott Wren, said Monday’s trading showed investors were generally waiting for other economic data this week on the manufacturing and service sectors as well as employment. Investors are prepared for weak economic data, Mr. Wren said, but could become unnerved if there is unwelcome corporate news.
“The market is already pricing in a ton of bad economic news,” he said. “Bad economic news is not going to drive the market. What’s going to drive the market is headline news.”
The quarterly performance was the worst since the July-September period of 2002, when the aftermath of the dot-com bust, recession, the terrorists attacks and corporate wrongdoing combined to send stocks spiraling downward. At that time, the Dow and S&P 500 each tumbled nearly 18 percent and the Nasdaq fell almost 20 percent.
Many analysts have suggested that the market has been seeking a bottom in recent weeks. But it will take some time — and a long period of at least stable trading — before anyone can feel secure that Wall Street is ready to resume an upward track.
One reason for the uneasiness is that many on Wall Street expected the first quarter to be much stronger for stocks than it turned out to be. The theory was that big financial firms had taken their hits in the final three months of 2007. But as the first quarter has shown, the fallout from investments in risky and possibly worthless mortgage-backed securities has continued along with the uncertainty in the credit markets.
The Fed, with a series of interest rate cuts and steps to make more credit available to banks and investment houses, helped restore some sense of calm to the Street. However, worries about recession and the health of consumers have also undermined the market’s attempts to recover, and as recently as last week, bad economic news sent stocks tumbling.
The dollar rose Monday against several other major currencies, easing pressure on commodities such as oil and gold. Light, sweet crude fell $4.04 to settle at $101.58 in New York trading, while gold fell $14.40 to finish at $916.20 an ounce.
Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.41 percent from 3.45 percent late Friday.
The drug maker, Merck & Company, fell $6.56, or 15 percent, to $37.95, and Schering-Plough declined $5.06, or 26 percent, to $15.41 after medical researchers said the companies’ joint cholesterol drug, Vytorin, failed to improve heart disease. The researchers’ findings, published by the New England Journal of Medicine, urged a return to more established treatments for cholesterol. Merck is one of the 30 stocks that comprise the Dow industrials and, as a result, dragged on the blue chips.
Citigroup Inc. rose 59 cents, or 2.8 percent, to $21.42 after announcing plans to split its consumer banking unit from its credit card business as part of a broader reorganization to cut costs and simplify the large financial institution’s structure. The company suffered billions of dollars in losses from investments in poor-quality mortgages.
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