Major indexes started the third quarter of 2008 with a volatile trading session, spending much of the day in negative territory but recovering after oil backed off from record levels and General Motors (GM) reported better-than-expected sales in June.
General Motors shares initially surged after data showed light vehicle sales at GM fell just 18% in June. Ford's (F) 28% decline was greeted with less enthusiasm. Ford shares ended the day down 2%, while GM rose 2%.
Auto sales had an impact, but if the stock market is a yo-yo, then the price of oil seems to be pulling the string.
Earlier on Tuesday, stocks suffered as oil rose above $143 per barrel, a move blamed on rising tensions in the Middle East. Traders also cited an International Energy Agency report Tuesday that said the supply of crude oil is expected to remain tight. However, crude oil for August delivery backed off, ending the day up 97 cents at $140.97 per barrel.
On Tuesday, the Dow Jones Industrial Average gained 32.25 points, or 0.28%, to 11,382.26. The S&P 500 added 4.91 points, or 0.38%, to 1,284.91. The tech-heavy Nasdaq Composite ended up 11.99 points, or 0.52%, to 2,304.97.
The broader market showed more weakness, with 18 stocks losing ground for every 13 in positive territory on the New York Stock Exchange. On the Nasdaq, the ratio was 17 to 12 negative.
On the surface at least, new economic data were better than expected Tuesday.
The U.S. ISM manufacturing index rose to 50.2 in June, a surprise increase from 49.6 in May.
U.S. construction spending fell 0.4% in May, less than economists were expecting, after a 0.1% decline in April. Despite a drop in consumer sentiment readings in June, economic data "are clearly outperforming a typical recession path," says Action Economics.
However, John Ryding and Conrad DeQuadros of RDQ Economics said the ISM index "suggests that manufacturing is stronger than typically seen in a recession," but "leading indicators within the ISM report were less upbeat," including a fall in orders, a rise in inventories and "very troubling" inflation readings.
Tuesday's session was the first of the third quarter, one day after the market ended a month, quarter and first half of the year that were disappointing by any measure. The Dow dropped 14.4% in the first half of 2008; the S&P 500 plunged 12.8%; and the Nasdaq fell 13.6%. While June is often a quiet month, last month was one of the worst Junes on record, with the Dow's decline the biggest in percentage terms since 1930.
Among other stocks in the news, the Belgian beer company InBev said Tuesday it would continue to pursue its $46 billion bid for Anheuser Busch (BUD) despite Anheuser's board rejection of the $65-per-share offer as "financially inadequate."
CME Group (CME) hurt exchange stocks after announcing its June volume was down 4% from the year before.
UBS (UBS) announced that four of the Swiss bank's 12 board members will step down amid large losses at the firm. Also, the Wall Street Journal reports that the U.S. Justice Department is pressing UBS to give up the names of clients who allegedly used the bank to avoid U.S. taxes.
CIT Group (CIT) said it will sell its home lending business for $1.5 billion to Lone Star Funds, including the assumption of $4.4 billion in outstanding debt. The business consists of $9.3 billion in assets and related servicing operations. CIT will also sell its $470-million manufactured housing portfolio to Vanderbilt Mortgage and Finance for $300 million.
Dollar Thrifty Automotive Group (DTG) says it doesn't expect to achieve its previously issued earnings guidance for 2008.
MGIC Investment Corp. (MTG) denied reports that it plans to issue additional shares. The firm says its plans haven't changed.
TierOne Corp. (TONE) announced it will close its nine loan production offices across the country, and direct lending activity to its primary market in Nebraska, Iowa and Kansas.
Major European indexes fell Tuesday. In London, the FTSE 100 index dropped 2.6% to 5,479.90. In Paris, the CAC 40 lost 2.11% to 4,341.21, while Germany's DAX index slipped 1.6% to 6,315.94.
In Asia, Japan's Nikkei 225 moved 0.13% lower to 13,463.20, while Hong Kong's market was closed.
Treasuries fell Tuesday after the better-than-expected ISM manufacturing reading. Ten-year note eased 04/32 to 99-03/32 for a yield of 3.99%, and the 30-year bond fell 09/32 to 97-11/32 for a yield of 4.54%.