Stocks looks to bounce back after late-day drop
June 8, 2010 Bernanke's comments come after another late-day plunge Monday
sent the Dow Jones industrial average to its lowest level in seven
months.
Sharp swings over the final hour of trading have become the norm
in the market over the past month as investors remain concerned
about what news might come out of Europe overnight about ongoing
debt problems. The end-of-day moves are similar to the ones seen in
late 2008 during the height of the credit crisis when investors
feared holding onto stocks overnight.
Bernanke said late Monday that European leaders were taking the
right steps to control rising deficits, but that wasn't enough to
satisfy concerned traders. Major European indexes fell again early
Tuesday.
Bernanke also said he didn't expect the U.S. economy to fall
back into a second recession, which is reassuring after Friday's
disappointing employment report.
The euro is rising after trading in a tight range overnight,
which has helped cut into losses in European markets. It has also
helped U.S. futures. The euro rose to $1.1953 a day after it
dropped to a new four-year low.
The European Union hammered out new oversight measures aimed at
heading off debt problems early among member countries. The EU's
credibility has been called into question in recent months as
countries like Greece, Spain and Portugal grapple with ballooning
debt and try to implement austerity measures.
That has drained confidence from the euro, the currency used by
16 European countries. The euro has dropped nearly 12 percent since
the beginning of May.
Ongoing uncertainty about Europe's health and the pace of a
domestic recovery sent investors back into some safe-haven
alternatives to stocks and the euro. Gold rose to a record high of
$1,254.50 an ounce early Tuesday, before pulling back to $1,244.80
an ounce. The recent gains in the euro and stock futures pulled
some investors away from gold.
Ahead of the opening bell, Dow Jones industrial average futures
rose 49, or 0.5 percent, to 9,843. Standard & Poor's 500 index
futures rose 5.50, or 0.5 percent, to 1,053.50, while Nasdaq 100
index futures rose 7.75, or 0.4 percent, to 1,803.50.
Major indexes are trying to snap a two-day losing streak that
has seen the Dow lose 4.3 percent. A disappointing jobs report
Friday sent the market plunging. Monday's drop did not have an
obvious catalyst.
The S&P 500 index fell below its previous lowest close for the
year late in the day Monday, triggering a fresh round of selling.
The S&P 500 posted its lowest close since November.
There are no major domestic economic reports due out Tuesday.
Bernanke said the U.S. economy is strengthening, albeit slowly.
Economic data in recent months has shown the economy is
recovering from recession. Jobs are being created, the
manufacturing sector has consistently expanded and inflation
remains tame. However, the pace of growth has not picked up as fast
as investors expected, which has provided further fuel for recent
selling.
The Fed releases its beige book report Wednesday, which provides
a regional snapshot of economic activity. That report could provide
some support for the battered market if the Fed's tone becomes more
positive about the speed of the recovery.
Meanwhile, bond prices dipped Tuesday. The yield on the
benchmark 10-year Treasury note, which moves opposite its price,
rose to 3.19 percent from 3.15 percent late Monday.
Overseas, Britain's FTSE 100 fell 0.8 percent, Germany's DAX
index dropped 0.8 percent, and France's CAC-40 fell 0.7 percent.
Japan's Nikkei stock average rose 0.2 percent.