In a fittingly gloomy conclusion to its worst August in nearly a decade, Wall Street closed in a standstill on Tuesday in the face of a rare cluster of upbeat reports on the state of the struggling economic recovery.
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Tthe Dow Jones Industrial Average rose 4.99 points, or 0.05%, to 10014.72, the S&P 500 gained 0.41 points, or 0.04%, to 1049.33 and the Nasdaq Composite dropped 5.94 points, or 0.28%, to 2114.03. The FOX 50 added 1.62 points, or 0.21%, to 761.83.
An early rally fueled by stronger-than-expected reports on consumer confidence and U.S. home prices proved to be fleeting as stocks took a U-turn late in the day. The afternoon stumble didn't appear to be caused by any new developments, but the markets remain jittery ahead of Friday's all-important monthly jobs report and crude oil tumbled nearly 4%.
Wall Street also had to digest the latest Federal Reserve minutes that showed policy makers at an August meeting were unsure of what steps should be taken next to boost the recovery.
The disappointing day on Wall Street comes after the Dow tumbled 141 points on Monday on the lightest volume of the year and despite positive news on consumer spending and the strengthening M&A market.
“We continue to be in a rather demoralized market. Right now, people are quicker to look for the negative than the positive,” said Michael James, senior equities trader at Wedbush Morgan Securities. “You would have expected after yesterday’s terrible action there would have been more sustainability to a positive attempt in the market.”
Rattled by signs the U.S. economic recovery has slowed significantly, the Dow lost 450 points this month -- its worst August since 2001 and weakest month overall since May. It was also the first negative August in five years. According to Dow Jones Market Data, the benchmark index has closed August down just 35% of the time over the past 114 years.
“The lack of liquidity and the negative tone in August has made the path of least of resistance to the downside this month. I know traders will not feel bad about August coming to an end today,” said James.
U.S. stocks initially rallied but then headed south following the release of the latest Federal Open Market Committee minutes, which showed Fed officials grappled with what steps should be taken next to boost the struggling recovery. While the central bank ultimately decided to reinvest proceeds from mortgage-backed securities into Treasuries to keep interest rates low, the Fed also left the door open to further MBS purchases if conditions worsen.
“The market was certainly expecting a sexier read from the minutes than we got,” NYSE trader Ben Willis of Sunrise Securities told FOX Business. “The question is what kind of bullets they have in the chamber for any kind of quantitative easing that is necessary."
The energy sector was among the biggest weights as crude oil suffered its steepest drop since June 4. Crude fell $2.78 a barrel, or 3.72%, to $71.92. For the month, crude oil tumbled 8.9%. Copper slid 1.52% a pound to $3.3610. Gold jumped $11.20 a troy ounce, or 0.91%, to $1,248.30 -- its highest settle since August 12.
Wall Street received just a fleeting bounce after the Conference Board inspired said its consumer confidence index jumped to a 53.5 reading in August, up from an upwardly-revised 51.0 in July and above expectations for a reading of 50.5. The rise in confidence comes despite the bleak economic reports and high unemployment. Traders were skeptical the improved sentiments will lead to an increase in consumer spending as consumer discretionary stocks like Whirlpool (NYSE:WHR) and Apple (NASDAQ:AAPL) closed mixed.
Home builders such as KB Home (NYSE:KBH) and Toll Brothers (NYSE:TOL) were also on the fence even after S&P/Case Shiller said its index on home prices in 20 metropolitan areas rose by 4.2% in June from the year before, beating expectations for an increase of 3.1%. However, the increase marked a deceleration from May's 4.61% rise after 16 consecutive months of improving price increases.
On the manufacturing front, the Chicago purchasing management index slumped to 56.7 in August, down from 62.3 in July but just narrowly missing forecasts for a reading of 57.0.
Wall Street came under pressure overnight as Japan's Nikkei 225 tumbled 3.55% to a fresh 16-month low amid continued worries over the negative side effects of the surging yen.
Saks (NYSE:SKS) surged 20% after the U.K.'s Daily Mail reported a consortium of U.S. and U.K. private-equity firms are pursuing a $1.7 billion take over of the high-end retailer. Due diligence on the bid is nearly complete, however a deal could face an obstacle as billionaires Carlos Slim and Diego Della Valle are major shareholders and will demand "top dollar," the paper reported.
JPMorgan Chase (NYSE:JPM) plans to close its commodities proprietary trading desk due to the impact of the Volcker Rule, which was part of the recently-passed financial regulatory overhaul, Dow Jones Newswires reported.
Deere (NYSE:DE) inked an $860 million deal to unload its wind power unit to electric utility company Exelon (NYSE:EXC). The move to acquire John Deere Renewables represents an expansion into wind generation by Exelon, giving the largest U.S. nuclear power operator an additional 735 operating megawatts of renewable energy.
Monsanto (NYSE:MON) saw its stock dropped almost 6% after cutting its non-GAAP 2010 EPS view to $2.30 to $2.45. Wall Street had been expecting EPS of $2.49. The world's largest seed maker also announced plans to cut an additional 650 to 700 jobs and take $150 million in restructuring charges.
Dell (NASDAQ:DELL) is expected to bow out of the running for 3PAR (NYSE:PAR), leaving Hewlett-Packard (NASDAQ:HPQ) as the victor in the bidding war over the data storage company, Reuters reported, citing a survey of eight technology investors and analysts. Dell faces a Wednesday deadline to match H-P’s $2 billion buyout bid, which came after a week of offers and counteroffers that sent 3Par’s stock surging.
Lion’s Gate (NYSE:LGF) soared 10% to 52-week highs after billionaire activist investor Carl Icahn raised his bid to acquire the studio by 15% to $7.50 a share. The stock traded as high as $7.40 Tuesday morning. The bid still faces hurdles, however, as Ichan must hold a 50.1% stake in the company.
H.J. Heinz (NYSE:HNZ) projected first-quarter operating profits to rise 10% and EPS of 75 cents, topping estimates from analysts for EPS of just 73 cents. The ketchup maker also sees sales growth of 1.6% and backed its earlier guidance for fiscal 2011 EPS to grow 7% to 10% on a constant currency basis.
Dollar General (NYSE:DG) beat the Street with a non-GAAP profit of 42 cents a share, compared with estimates for 38 cents. The discount retailer's revenue jumped 11% to $3.21 billion, matching consensus calls from analysts. Dollar General also upped its 2010 outlook, now saying it sees sales climbing 8.5% to 10.5% and non-GAAP EPS of $1.68 to $1.74. Analysts had forecasted 2010 EPS of $1.72.
The U.K.'s FTSE 100 rose 0.45% to 5225.22, Germany's DAX gained 0.22% to 5925.22 and France's CAC 40 advanced 0.11% to 3490.79.
In Asia, Japan's Nikkei 225 plunged 3.55% to 8824.06 and Hong Kong's Hang Seng slid 0.97% to 20536.49.