Dow Rallies, But Nasdaq Slips in Volatile Trading


FOX Business: The Power to Prosper

The blue chips rallied, but the Nasdaq couldn't get out of the red, as traders parsed through a slew of corporate headlines following a steep retreat last week.

Today's Markets

As of 11:16 a.m. ET, the Dow Jones Industrial Average climbed 127 points, or 1.2%, to 10,900, the S&P 500 gained 7.9 points, or 0.69%, to 1,144 and the Nasdaq Composite dipped 2.6 points, or 0.1%, to 2,481.

Trading was very choppy on Monday, with the Dow posting triple-digit gains, but the Nasdaq stuck in the red.  The blue chips were led higher by a broad swatch of issues, including Boeing (NYSE:BA), Hewlett-Packard (NYSE:HPQ) and JPMorgan Chase (NYSE:JPM).

Apple (NASDAQ:AAPL) was a major drag on the Nasdaq after analysts at JPMorgan Chase noted the world's largest technology company is slashing parts orders for its super-popular iPad by 25% for the fourth quarter.  The move is not forecast to be in preparation of a new model, the report noted. Boeing, meanwhile, signed a final contract to provide the first long-awaited Boeing 787 Dreamliner.

From a broad level, financials performed the best by far, while technology shares lagged behind significantly.

The economic calendar is fairly light on Monday, with a report on new home sales being the only major release.  Sales of new homes fell 2.3% in August from July to an annualized unit rate of 295,000, according to the Commerce Department, which was in line with expectations.  This represents the fourth-straight monthly decline.  The level of new homes on the market hit a record low, which, could potentially help provide a bottom to prices. However, even with inventory levels being low, some analysts forecast continued sluggishness in homebuilding.

"Even with very low levels of inventory, the soft pace of sales continues to keep inventory elevated in terms of months' supply, restricting the need for new home building," economists at Barclays Capital said in a research note.

The new home industry has been under continued pressure as a result of weak lending conditions, high supply, and generally depressed prices across the country.

With little data on tap, Monday's session may be another volatile ride that is driven by headlines on Europe's sovereign debt crisis, according to Ben Critchley, sales trader at IG Index, a London-based trading firm.

European Central Bank Governing Council member Ewald Nowotny suggested Monday that a rate cut by the region's central bank shouldn't be ruled out, according to a report by Reuters.  The generally inflation-hawkish ECB halted its rate cuts at its September meeting only five months after starting to hike rate amid increasing economic headwinds.

There were also reports over the weekend regarding additional measures to make it easier to euro zone countries like Greece to access funding, which has been struggling with a nearly $500 billion public debt load and has received enormous bailouts from the European Union and International Monetary Fund.  The country, analysts say, is likely to default on its debt if it doesn't receive the next round of rescue aid next month.  The increased likelihood of a default has made it more expensive for other highly-indebted euro zone countries like Italy, Spain and Portugal to access funding in the private markets, sparking fears of the debt crisis could escalate significantly should Greece default.

In particular, policymakers are said to be in discussions about strengthening the so-called European Financial Stability Facility, which was set up in 2010 to help ease the pressures of the debt crisis.

Still, many market participants remained wary of policymakers' ability, or inclination, to further enhance the size of rescue funds.

'Dysfunctional Policy Performances'

"Euro area politicians and policymakers are still behind the curve in tackling the debt problems comprehensively enough to successfully contain or even reverse contagion," analysts at Barclays Capital wrote in a note to clients. "This overall policy uncertainty is not only not helpful, it is also damaging market confidence."

In fact, economists at Deutsche Bank blamed "dysfunctional policy performances" in the U.S. and Europe as main contributors to damaging the U.S. economy, particularly, in hurting Americans' wealth and confidence.  The German-based investment bank also warned that if "policy uncertainty intensifies further ... a recession could still ensue."

Wall Street was in selloff mode last week: the Dow plummeted 738 points, or 6.4%, while the broader S&P 500 shed 6.5%.  The flight from risky assets wasn't limited to equities, as oil and gold prices plummeted nearly 10%, while the yield on the benchmark 10-year Treasury note hit historical lows repeatedly.

In currencies, the euro dipped 0.64% against the U.S. dollar, while the greenback slumped 0.1% against a basket of world currencies.

Energy markets were in the red.  Light, sweet crude fell $1.40, or 1.2%, to $78.42 a barrel.  Wholesale RBOB gasoline slipped less than a penny to $2.55 a gallon.

Gold tumbled $43.40, or 2.7%, to $1,595 a troy ounce.  The yield on the 10-year Treasury rose 1.857% from 1.839%.

Corporate News

Netflix (NASDAQ:NFLX) struck a deal with Dreamworks Animation (NASDAQ:DWA) to stream first-run movies and television specials from the studio behind "Shrek" and "Madagascar." Shares were sharply higher on the news.

Berkshire Hathaway unveiled plans to buy back class A and B shares at no more than a 10% premium, sending shares soaring.

McGraw-Hill (NYSE:MHP) warned shareholders that the Securities and Exchange Commission is considering punishing the company’s Standard & Poor’s unit due to its handling of a 2007 security that imploded.

Foreign Markets 

The English FTSE 100 climbed 1.5% to 5,077 and the German DAX jumped 1.7% to 5,285.

In Asia, the Japanese Nikkei 225 slumped 2.2% to 8,374 and the Chinese Hang Seng dropped 1.5% to 17,408.