Dow manages comeback
Blue-chip barometer leads turnaround effort as major gauges recover from earlier selloff.
NEW YORK (CNNMoney.com) -- The Dow Jones industrial average staged a comeback Monday afternoon, recovering from an earlier selloff sparked by renewed worries about the credit and mortgage markets.
The Dow Jones industrial average (up 39.42 to 13,118.50, Charts) added around 42 points, or about 0.3 percent, according to early tallies, while the broader S&P 500 (down 0.73 to 1,445.21, Charts) index was little changed. The tech-fueled Nasdaq Composite (up 2.53 to 2,507.56, Charts) index gained a few points.
All three major gauges seesawed throughout the session, slumping in the early afternoon, rallying in the late afternoon, and then giving up some of that advance right near the close.
Even so, the relatively mild day was a welcome relief after several weeks of extremely volatile markets, said Art Hogan, chief market analyst at Jefferies & Co.
"We'll take it," Hogan said. "There were no disasters, nobody blew up. The worst piece of news was that Thornburg took a massive loss, but that's mostly bad news for Thornburg."
Stocks have gotten pummeled in volatile trading in recent weeks, reflecting investor worries about ongoing problems in the credit and mortgage markets.
Here's a look at what was moving stocks near the close.
Stocks jumped Friday after the Federal Reserve cut its little used discount rate - the rate the central bank charges banks for temporary loans - by a half-percentage point to 5.75 percent. Although it did not cut the more widely-watched fed funds rate, which affects consumer loans, the move nonetheless soothed worries about the credit and mortgage markets that have roiled Wall Street for weeks.
Additionally, the move raised bets that the Fed will cut the fed funds rate at the Sept. 18 policy meeting. On Monday, the central bank said it had added another $3.5 billion to the banking system overnight, extending its recent run of infusing cash into the system, in tune with central banks worldwide.
But credit worries remain and after a mixed morning on Wall Street, stocks turned lower at midday, led by financial and other credit-sensitive issues.
"As long as the Federal Reserve and other central banks worldwide can keep the liquidity flowing, the crisis for stocks will be limited," said Robert Loest, portfolio manager at Integrity Funds. "The fallout for the housing market will be longer term."
"If investors can wait out a few more weeks, I think conditions will improve," he added.
He said that for the time being, investors should stay away from stocks that are banking-, housing- or consumer-related.
J.P. Morgan Chase (down $0.57 to $46.44, Charts, Fortune 500) was the Dow's biggest loser, attesting to the midday selloff in financial stocks. Yet a number of Dow stocks rose, including Honeywell (up $1.48 to $55.94, Charts, Fortune 500), Intel (up $0.42 to $24.12, Charts, Fortune 500), Caterpillar (up $1.50 to $74.14, Charts, Fortune 500), Alcoa (up $0.99 to $34.28, Charts, Fortune 500) and other recently battered components.
In other news, Countrywide Financial (down $1.56 to $19.87, Charts, Fortune 500) has reportedly started laying off employees, in an effort to cut costs amid its ongoing credit crunch, the Wall Street Journal reported. Shares of the troubled mortgage lender inched higher Monday morning.
Market breadth was mixed. On the New York Stock Exchange, winners beat losers on volume of 1.23 billion shares. On the Nasdaq, decliners and advancers were roughly even on volume of 1.38 billion shares.
In economic news, the July index of Leading Economic Indicators (LEI) rose 0.4 percent, in line with estimates, after falling 0.3 percent in June.
U.S. light crude fell 86 cents to $71.12 a barrel on the New York Mercantile Exchange, sliding on signs that Hurricane Dean is unlikely to disrupt refining centers in the Gulf of Mexico.
COMEX gold for December delivery rose 20 cents to $667 an ounce.
Treasury prices gained, lowering the benchmark 10-year note yield to 4.62 percent from 4.67 percent late Friday. Bond prices and yields move in opposite directions.
In currency trading, the dollar was little changed versus the euro and gained versus the yen.