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Stock markets mixed on US debt levels

10 December 2009 09:03 (UTC +04:00)

Baku- APA-Economics. The stock market hovered near the flat mark Wednesday as concerns about mounting debt levels around the world ate into gains in shares of energy and materials companies.
The back-and-forth trading came as investors grew cautious about government debt in Spain, Greece and other countries. Investors have been looking for any signs that debt problems could trip up a global economic recovery.
Stocks pared their losses as the dollar fell. The weaker greenback has been a big force behind the market’s steep gains this year. When it falls, the dollar makes commodities cheaper for foreign buyers and increase profits for U.S. companies that do business outside the U.S.
The dollar has fallen steadily against other currencies since March as investors take advantage of cheap financing to invest in riskier, higher-yielding assets like stocks and commodities. That drop in the dollar occurred as investors became more willing to take on risk and move out of safe-haven investments like the dollar amid signs that the economy was improving.
In recent weeks, however, investors have been shuttling between stocks and seeking safety in U.S. dollar cash investments as they try to determine how strong the economic recovery will be and where they will be able to make the biggest returns.
Separately, the Commerce Department reported that businesses added to inventories at the wholesale level in October after a record 13 straight months of reductions. Investors hope it is a sign that businesses will soon start restocking store shelves. Wholesale inventories rose 0.3 percent in October; economists had expected a 0.5 percent drop.
As the end of the year approaches, many investors are looking to lock in some of the big gains they’ve made this year, and many have been adding defensive investments like the dollar and Treasurys. The uncertain tone in the market, combined with light trading volume, has made for choppy trading, which analysts expect to continue through the rest of the year.
Tom Phillips, president of TS Phillips Investments in Oklahoma City, said he expects the dollar will lose its pull over the stock market because so many traders have placed bets that the currency will fall and boost stocks.
"When everybody understands the game the game doesn’t work as well," he said. "I think it will just fray and start to erode."
In midday trading, the Dow Jones industrial average rose 13.67, or 0.1 percent, to 10,299.64. The Standard & Poor’s 500 index slipped 0.23, or less than 0.1 percent, to 1,091.71, while the Nasdaq composite index fell 2.26, or 0.1 percent, to 2,170.73.
The ICE Futures US dollar index, which tracks the dollar against other major currencies, fell 0.2 percent.
Investors grew concerned that growing debt loads in countries like Greece and Spain as well as the U.S. and Britain could signal that the threat of defaults and higher borrowing costs could upend a nascent global economic rebound.
While investors want to see the economy grow, they also know that the Federal Reserve could raise interest rates and remove other stimulus measures once the economy appears to be on solid footing. Higher rates could make stocks look less appealing as returns for other investments improve, potentially upsetting a nine-month advance in stocks that has lifted the S&P 500 index by 61.4 percent.
Treasurys, also considered safe-haven assets, slipped. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.40 percent from 3.39 percent late Tuesday.
Commodities prices were mixed. Gold fell, while oil slipped 5 cents to $72.57 per barrel on the New York Mercantile Exchange.
The Russell 2000 index of smaller companies fell 2.81, or 0.5 percent, to 594.89.
Four stocks fell for every three that rose on the New York Stock Exchange, where volume to 402.5 million shares compared with 468.3 million shares traded at the same point Tuesday.
Overseas, Japan’s Nikkei stock average fell 1.3 percent. In afternoon trading, Britain’s FTSE 100 fell 0.4 percent, Germany’s DAX index fell 0.7 percent, and France’s CAC-40 fell 0.7 percent.