NEW YORK: U.S. stocks ended Tuesday session with slight increase, as technology stocks led the market to get some momentum. The main benchmarks turned large early losses into gains, only to end around where they started the session.
Intraday volatility reflects uncertainty about the monetary policy in Europe, with investors appearing skeptical about the ability of central banks to combat deflationary forces.
The European Central Bank is widely expected to announce a government-bond-buying program on Thursday; however, the program’s scope may disappoint investors, analysts have warned.
U.S. markets were closed on Monday in observance of the Martin Luther King Jr. holiday.
The S&P 500 SPX, +0.15% closed 3.13 points, or 0.2%, higher at 2,022.55, with technology stocks in the lead.
The Dow Jones Industrial Average DJIA, +0.02% ended with a marginal gain of 3.66 points to 17,515.23.
The Nasdaq Composite COMP, +0.44% outperformed other indexes, adding 20.46 points, or 0.4%, to 4,654.85. Apple Inc, AAPL, +2.58% the largest component on the index accounted for a big portion of the gains, as the stock rose 2.6%.
Ten-year Treasurys TMUBMUSD10Y, -0.06% rallied but trimmed initial gains. The yield declined by 1.2 basis points to 1.803% at the close. The yield on the benchmark debt has steadily declined over the past 12 months.
“The big elephant in the room is deflation, and many portfolio managers are beginning to adjust their models to work in a low-interest-rate environment,” said Marty Leclerc, chief investment officer of Barrack Yard Advisors. “That adjustment period spells volatility.”
Leclerc stressed that in the short term the environment will be favorable for stocks, as investors may justify higher price-to-earnings ratios when real interest rates are at zero.
Peter Cardillo, chief market economist at Rockwell Global Capital, said the day’s action is all about the fear of a global economic slowdown. “We are in the midst of earnings, and markets are not reacting to positive results, and the culprit is concern about Asia and Europe,” he said. “The bond market is afraid of deflation, which is why we are seeing such low yields on long-dated Treasurys.”
In economic news, a gauge of confidence among home builders ticked down this month by one point to 57, staying close to the highest level since late 2005, according to National Association of Home Builders/Wells Fargo data released Tuesday morning. Readings above 50 signal that builders, generally, are optimistic about sales trends.
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