Stocks rally as Greek debt talks show signs of life
After losing for most of the day, the Dow rallied to close up four points at 12878 on late reports that suggested the unraveling Greek debt talks might be saved after all.
The stock market rallied in the last half-hour Tuesday, seizing on reports that suggested the unraveling Greek debt talks might be saved after all. Stocks finished flat after languishing in the red for most of the day.Skip to next paragraph
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The Dow Jones industrial average gained 4.24 points to close at 12,878.28, about 12 points shy of its best finish this year. The Standard & Poor's 500 lost 1.27 points to close at 1,350.50. The Nasdaq composite index gained 0.44 point to 2,931.83.
The meeting was called off after Athens failed to deliver on several demands made by its partners in the euro currency union. Greece needs a €130 billion bailout by March 20 to avoid a default that could rattle the world financial system.
Stocks in the U.S. were also hurt by a discouraging report on retail sales. Bank of America led the Dow lower, dropping 3.3 percent.
The Dow was down as much as 87 points at its low for the day. But the market found hope in reports quoting Greek government officials as saying party leaders would promise by Wednesday to implement deep spending cuts and other reforms.
Declining stocks still outnumbered advancing stocks by about 2-to-1. Volume was light at about 3.8 billion shares on the New York Stock Exchange.
The stock market has been rising slowly but steadily most of this year, despite the unresolved debt crisis in Europe and a stalemate over U.S. tax policy and benefits for the long-term unemployed.
For most of Tuesday, investors appeared to be waiting for more clarity on all those issues before sinking more money into stocks, said Colleen Supran, a principal at the investment adviser Bingham, Osborn & Scarborough.
"Everyone wants to know the rules of the game before making these decisions," Supran said.
The late-day rally was a sign that investors expect the coming round of Greek debt talks to resolve some of those outstanding questions. The talks have brought incremental and sometimes contradictory developments that have confused some investors.
The country has already passed some of the deep spending cuts its lenders were demanding but hasn't really satisfied anyone. Greeks have rioted, saying the cuts are too harsh, and Greece's neighbors have expressed concern that the cuts are not enough.
"Every week it's, 'The sky is falling,' then, 'No, it's not.' 'There's rioting in the street,' then it's over. 'There's going to be a deal Friday,' then, 'No, it's not Friday, it's Wednesday,'" said Ben Schwartz, chief market strategist at Lightspeed Financial in Chicago. "We really don't know what's underneath the covers over there."
He thinks U.S. stocks will continue to inch forward — not because investors are particularly optimistic about U.S. companies but because they have even less faith in European governments.
"We're the best house in a bad neighborhood," he said.
Downbeat economic news from Europe reinforced the danger. Greece said its economy shrank drastically at the end of last year, and Europe is expected to report Wednesday that the economies of the 17 countries that use the euro shrank 0.4 percent after growing 0.1 percent the quarter before.
News out of the U.S. was also disappointing. The Commerce Department said U.S. retail sales rose 0.4 percent last month, but analysts were expecting 0.7 percent, and spending on auto sales was down. Automakers had reported higher sales, so Tuesday's numbers could mean they have had to offer more discounts to persuade customers to spend.
— Yahoo fell 5 percent after reports that its plans to sell its Asian assets, a key strategy for turning around the troubled company, fell apart.
— Goodyear Tire and Rubber Co. fell 5 percent after its fourth-quarter profits missed analysts' expectations.
— Bank of America fell 3.3 percent after Citi analyst Keith Horowitz downgraded his rating to neutral, saying the bank's "legacy issues," notably its 2008 purchase of mortgage lender Countrywide, "will take a while to play out."
— Luxury retailer Michael Kors Holdings Limited was a bright spot, shooting up 28 percent after revenue skyrocketed 69 percent in the latest quarter. The company, which peddles $300 sequined jumpsuits and wristwatches at stores in cities like Milan and Paris, was helped by strong holiday sales as well as new stores. Its results are also a sign that wealthy customers are continuing to shop even as the rest of the economy struggles.