US stocks waver; euro dives on Greece turmoil
Stronger news about the U.S. economy stilled the ripples from Europe's latest political impasse Tuesday, pushing U.S. stocks between modest gains and losses.
The euro and European stocks plunged as trading in New York began after efforts to form a government in Greece collapsed. Newly-elected political leaders there disagree about whether to accept more international bailouts and continue with painful spending cuts.
In the U.S., stocks staged a mid-morning rally after word that confidence among U.S. builders rose to a five-year high in May. The index has risen for seven of the past eight months. Homebuilders rallied. Hovnanian Enterprises surged 10 percent, Lennar Corp. 4 percent and KB Home 3 percent.
Earlier, a survey by the New York Federal Reserve found that manufacturing activity in the New York region rebounded this month far more strongly than economists had expected.
The market's early rise deflated briefly, then stocks climbed at midday to new daily highs. By the afternoon, the indexes again were flat for the day.
The Dow Jones industrial average fell 12 points to 12,683 as of 3 p.m. EDT. Losses by most of its components were offset by gains for JPMorgan Chase and Bank of America, shaking off recent losses related to the surprise $2 billion trading loss that JPMorgan announced last week.
The Standard & Poor's 500 index fell two to 1,336. The Nasdaq composite index rose seven to 2,909.
Stocks are having their worst month in the past eight. For the month, the Dow is down 518 points - about 4 percent - after hitting a four-year high on May 1. The average is on track to post its first monthly loss since September, when it fell 6 percent.
If the Dow closes higher, it will be only its second up day since the peak reached on May 1.
The euro fell as low as $1.2730, a four-month low against the dollar, after Greek socialist leader Evangelos Venizelos declared that attempts to form a governing coalition there had failed and new elections will be held next month. If voters elect parties opposed to the terms of the country's financial rescue, Greece could be expelled from the euro, shocking global markets.
Stock indexes in France, Britain and Germany gave up earlier gains after Venizelos' remarks and closed sharply lower.
Aside from fears about Europe, stocks are suffering because a string of weaker economic data in recent weeks has dampened hopes for corporate performance in the current quarter ending June 30, said John Butters, senior earnings analyst at FactSet, a financial data provider.
For the first month of the quarter, as earnings came in strong and stocks rose, analysts' expectations for second-quarter earnings growth held steady at 6 percent, Butters said. In the two weeks since then, as the U.S. economy appeared to soften and Europe's problems reemerged, analysts cut their estimates for S&P 500 earnings growth to 5 percent, he said.
Analysts expect earnings to decline this quarter for half of the 10 industry groups in the S&P 500, Butters said. He said many expect a strong rebound in the fourth quarter as demand returns in emerging markets such as China and India.
Among other stocks making big moves:
- Home Depot slumped 2 percent, the most of the 30 companies in the Dow, after the world's biggest home-improvement company forecast revenue that was below what Wall Street analysts were expecting.
- TJX Cos., which owns the T.J. Maxx, Marshalls and HomeGoods store chains, shot up 7 percent, the most in the S&P 500 index. The discount retailer reported a 58 percent surge in first-quarter income and raised its full-year profit forecast.
- Avon Products Inc. fell 11 percent, the most in the S&P 500 index, after Coty Inc. canceled its unsolicited, $10.7 billion bid for the cosmetics retailer.
- Groupon leapt 6 percent after the online daily discount site reported first-quarter revenue that exceeded analysts' expectations.