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updated: 8/22/2011 4:36 PM

Stocks reverse four-week losing trend

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  • Wall Street, which opened firmly higher, also weakened in noon trading, bit the markets finished with modest gains.

      Wall Street, which opened firmly higher, also weakened in noon trading, bit the markets finished with modest gains.
    Associated Press

 
Associated Press

NEW YORK -- It was another day of big swings in the Dow Jones industrial average, but at least Monday ended with a modest gain.

The Dow soared 200 points in the morning, an encouraging start after four weeks of losses. By noon that gain shriveled to just 2 points, then came a rise of another 100 in the afternoon. At the end of the day, the Dow closed up 37 points.

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Compared with the even wilder fluctuations over the past two weeks, Monday's trading looked relatively calm. The Dow has gained or lost at least 200 points eight days in August, including a 419-point plunge last Thursday. A downgrade of the U.S. credit rating and fears of a new recession have shaken investors, leaving the Dow down 10 percent this month.

Hewlett-Packard Co. rose 3.6 percent, the most of the 30 large companies in the Dow Jones industrial average. H-P sank 20 percent on Friday after saying it planned to sell its PC business and stop selling other products.

Bank stocks, which have been clobbered over worries about Europe's debt crisis, took another fall. JPMorgan Chase & Co. dropped 2.7 percent. Bank of America lost 7.9 percent, the biggest drop among the 30 Dow companies. Analysts at Wells Fargo cut their price target on the stock, citing fears that the U.S. could slip back into a recession.

Sam Stovall, chief investment strategist at Standard & Poor's equity research, cautioned against reading too much into the market's early jump Monday. "A two-hour rally isn't enough to change the trend," Stovall said. "It's natural in a declining market to have some days that run counter to the overall trend."

The S&P 500 index has lost 13 percent this month, putting the broad market measure on course for its worst August since 1998. After falling four weeks in a row, some stocks are appearing too cheap for investors to pass up, Stovall said.

Investors are still worried that the U.S. may fall into another recession. Some hope the Federal Reserve may announce some kind of action to help the economy when it holds its annual retreat in Jackson Hole, Wyo., on Friday. It was at the same conference a year ago that Fed Chairman Ben Bernanke hinted that the central bank would buy Treasury bonds to push interest rates lower.

The Dow rose 37 points, or 0.3 percent, to close at 10,854.65. The S&P 500 rose 0.29 points, or less than 0.1 percent, to 1,123.82. It had been up as many as 22 points. The Nasdaq rose 3.54 points, or 0.2 percent, to 2,345.38.

Stocks have fallen for four weeks on signs that the U.S. economy is slowing. 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.

The Chicago Board of Options Exchange's volatility index has soared 68 percent this month. That's a sign investors are anticipating more wide swings in the S&P 500, the index most professional investors use. The index fell 1.4 percent Monday.

Treasury bond prices and gold have been rising this month as investors seek refuge from the turmoil in stocks. The yield on the 10-year Treasury note dipped below 2 percent last week, a record low. The yield ended the trading day at 2.10 percent Monday. Yields on bonds fall when demand for them increases.

Gold rose 2 percent to $1,892. Gold has gained 16 percent so far in August.
Six of the 10 industry groups in the S&P 500 rose. Telecom stocks rose less than 1 percent, the most of any industry in the index. Boeing Co. rose 1.5 percent after Britain's Royal Air Force said it would buy 14 Chinook helicopters for $1.6 billion.

Lowe's Cos. rose 1.1 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.

No major economic reports came out Monday. Later in the week, traders will be sorting through figures on new home sales, chain store sales, durable goods orders and weekly claims for unemployment benefits to see if another recession could be on the way. The government will also release revised figures for second-quarter economic growth Friday. Another significant revision downward could alarm investors.

Three stocks fell for every two that rose on the New York Stock Exchange. Trading volume was above average at 4.8 billion.

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