U.S. stocks pared losses as the cheapest valuations for the Standard & Poor’s 500 Index since 2009 lured investors and Federal Reserve Chairman Ben S. Bernanke said he is ready to take more steps to boost growth.
Technology and consumer discretionary companies reversed early losses. Intel Corp. and Sears Holdings Corp. paced advances among the largest companies, rising at least 1.1 percent. AMR Corp. surged 17 percent after analysts said the parent of American Airlines is unlikely to file for bankruptcy. Utility and telephone companies dropped more than 1.6 percent for the biggest declines among 10 groups in the S&P 500.
The S&P 500 slid 0.6 percent to 1,092.19 at 11:31 a.m. New York time, after losing as much as 2.2 percent. The Dow Jones Industrial Average fell 149.55 points, or 1.4 percent, to 10,505.75 today.
"We’re really oversold," Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, said in a telephone interview. His firm oversees $550 billion. "The U.S. data has not been bad. The Fed has indicated that it’s not out of bullets. There’s no sign of recession in the U.S. and yet the market is pricing for one."
Investors who bought S&P 500 shares three years ago and held on to the stocks have made no profit. The gauge closed at 1,099.23 yesterday, the same closing level as on Oct. 3, 2008, and the benchmark measure’s lowest close since Sept. 8, 2010. The index would complete a 20 percent decline from its April 29 high, the threshold for a bear market, by closing below 1,090.88 today.
‘Further Action’
The Fed “will continue to closely monitor economic developments and is prepared to take further action as appropriate to promote a stronger economic recovery in a context of price stability,” Bernanke said today in testimony to Congress’s Joint Economic Committee in Washington. The remarks signal Bernanke may not be finished with attempts to stimulate the economy after a near-zero benchmark interest rate and $2.3 trillion of debt purchases since 2008 failed to produce self-sustaining growth in the economy and employment.
Concern governments may be running out of tools to keep the global economic slowdown from worsening has left equities from Sao Paulo to Hong Kong and Frankfurt in bear markets. The declines have confounded bullish investors who speculated the recovery that began in March 2009 would boost stocks for a third year.
Global Growth
Goldman Sachs Group Inc. cut its global growth forecast for this year and next, predicting recessions in Germany and France as the European economy stalls and the risk of contraction in the U.S. grows. The world economy will probably expand 3.8 percent this year and 3.5 percent in 2012, compared with earlier predictions of 3.9 percent for 2011 and 4.2 percent for next year, Goldman Sachs economists Jan Hatzius and Dominic Wilson wrote in an Oct. 3 report.
Orders for U.S. capital equipment increased in August by the most in three months, a Commerce Department report showed, a sign business investment and exports held up in the face of mounting concern over the European debt crisis. Demand for all factory goods declined 0.2 percent.
Finance Minister Evangelos Venizelos said Greece has enough cash to operate until mid-November, after euro-region finance ministers delayed a decision on the nation’s next emergency-loan payment.
"The situation in Europe is the big overhang right now," John Carey, a Boston-based money manager at Pioneer Investments, said in a telephone interview. The firm oversees about $250 billion. "The market has overshot on the downside. The economic news is not as bad as the market thinks. It’s just a lot of worry and concern."
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