Stocks rebound after week of losses
Stocks rise sharply after last week's 4 percent loss on the Dow. But traders caution that the bounce in stocks may not last.
NEW YORK — Stocks rose sharply Monday, shaking off a four-week losing streak.
The Dow Jones industrial average rose 83 points, or 1 percent, to 10,903 in late morning trading. The Dow fell 4 percent last week as worries deepened that the U.S. economy could slip back into a recession.
Stocks have been swinging wildly over the past two weeks after a downgrade of the U.S. government's credit rating and new signs of economic weakness led investors to dump risky assets and seek safety in Treasury bonds and gold. So far in August the Dow has had eight days with moves of more than 200 points.
Many traders are looking ahead to a speech by Ben Bernanke, the Federal Reserve chairman, at an annual meeting in Jackson Hole, Wyo. on Friday. Last year, Bernanke's speech at Jackson Hole set the stage for a $600 billion program to stimulate the economy through buying Treasury bonds. Some analysts believe the Fed may make another move to help the flagging U.S. economy.
Sam Stovall, chief investment strategist at Standard & Poor's equity research, cautioned against reading too much into the market's moves Monday. "It's natural in a declining market to have some days that run counter to the overall trend," he said. "It's normal to have a bounce back."
After falling four weeks in a row, some stocks are too cheap for investors to pass up, Stovall said. Stovall also thinks some investors are banking on Bernanke offering some soothing words in his speech Friday. "Even if the Fed just lets people know they're not asleep, that would help," he said.
Brent crude prices fell to near $107 a barrel after Libyan rebels swept into Tripoli, the country's capital. If the uprising succeeds in toppling Moammar Gadhafi, the OPEC nation's oil exports could resume soon.
The gains early Monday were broad; all 10 industry groups in the S&P 500 rose. Technology stocks rose 1.8 percent, the most of any industry in the index. Hewlett-Packard Co. rose 5 percent, the most of any stock in the Dow Jones industrial average.
Lowe's Cos. rose 1.5 percent. The home improvement retailer said it will buy back up to $5 billion stock over the next two to three years. Last week, Lowe's lowered its sales forecast for the second half of the year as shoppers grow more worried about the economy.
The S&P 500 index rose 7 points, or 0.7 percent, to 1,131 in Monday morning trading. The Nasdaq rose 20 points, or 0.9 percent, to 2,362.
Stocks have fallen for each of the past four weeks on worries that the U.S. might enter another recession. The S&P 500 index lost 4.7 percent last week. The sharpest drops came Thursday with news of weaker manufacturing in the mid-Atlantic states and an increase in the number of people who applied for unemployment benefits.
No major economic reports are due out Monday. Later in the week, traders will be sorting through figures on new home sales, durable goods orders and weekly claims for unemployment benefits to see if another recession could be on the way.