New York: US stocks steadied Tuesday after Federal Reserve chairman Ben Bernanke said he doesn’t expect the economy to slide back into recession. A rebound in the euro also help support the market.
The Dow Jones industrial average rose about 55 points in midday trading after falling almost 440 over the previous two days. The Standard & Poor’s 500 index rose, while the technology-heavy Nasdaq composite index fell.
Bernanke’s comments late Monday reassured investors following Friday’s disappointing May jobs report. His assessment also eased worries that a slowdown in Europe will spread across the Atlantic.
Stocks again tracked movements of the euro. The 16-nation currency has become a measure of confidence in Europe’s ability to contain its debt problems and keep its economy growing. Stocks stabilized as the euro climbed. The euro rose to $1.1985, a day after touching a new four-year low.
The muted trading comes after two straight late-day plunges sent the Dow to its lowest level in seven months. Traders’ concerns that some European countries will be overwhelmed by their debt problems, and that those problems will spread, have contributed to stocks’ slide.
Bernanke said in a speech that he expects the US recovery to continue, but he acknowledged it is unlikely to be robust.
“It won’t feel terrific,” Bernanke said.
Bernanke also said European leaders were taking the right steps to control rising deficits. While his remarks had a calming effect on US markets, major European indexes fell again Tuesday after Fitch Ratings warned that Britain faces “formidable” fiscal challenges.
European Union countries pledged Tuesday to start slashing debt and to do more to keep each others’ finances in line. The move is aimed at reassuring the market and holding down borrowing costs for the 27 countries in the EU. Controlling deficits could also boost confidence in the euro. Debt problems in countries including Greece, Spain and Portugal have raised fears that countries could default on their debt.
Uri Landesman, president of Platinum Partners in New York, said traders are still cautious and could resume selling if more doubts arise about the recovery.
“People’s tolerance for bad news is low,” he said. “There is a reasonably high chance of bad headlines.”
In midday trading, the Dow rose 56.08, or 0.6%, to 9,872.57. The Dow has fallen 4.3% over the past two days and dropped Monday to its lowest close since 4 November 2009.
The S&P 500 index rose 6.03, or 0.6%, to 1,056.50. It also fell Monday to its lowest close since November. The S&P’s two-day slide of 5.4% was its steepest since March 2009.
The Nasdaq fell 7.31, or 0.3%, to 2,166.59.
Advancing stocks narrowly outpaced those that fell on the New York Stock Exchange, where volume came to 600 million shares compared with 471 million traded at the same point Monday.
Crude oil rose 72 cents to $72.16 per barrel on the New York Mercantile Exchange.
Uncertainty about the global economy sent investors looking for safe alternatives to stocks and the euro. Gold rose to a record high of $1,254.50 an ounce early Tuesday, before pulling back to $1,243.70 an ounce. Gains early Tuesday in stocks and the euro pulled some investors away from gold after it touched a new high.
There was less demand for the safety of Treasurys. The yield on the benchmark 10-year note, which moves opposite its price, rose to 3.18% from 3.15% late Monday.
Economic data in recent months have suggested that the economy is recovering. Jobs are being created, manufacturing has consistently expanded and inflation remains tame. However, the pace of growth has not picked up as fast as investors expected, which has provided further fuel for recent selling.
The Fed releases its Beige Book report Wednesday, which provides a regional snapshot of economic activity. That report could provide some support for the battered market if the Fed’s tone becomes more positive about the speed of the recovery.
The Russell 2000 index of smaller companies fell 2.74, or 0.4%, to 615.75.