After showing a notable move to the downside in morning trading on Wednesday, stocks staged a significant recovery over the course of the afternoon. The volatility came as traders kept a close eye on developments in Europe.
The major averages eventually ended the session mixed, with the Dow stuck just below the unchanged line. While the Dow edged down 6.66 points or 0.1 percent to 12,496.15, the Nasdaq rose 11.04 points or 0.4 percent to 2,850.12 and the S&P 500 crept up 2.23 points or 0.2 percent to 1,318.86.
Continued worries about the financial situation in Europe contributed to the early weakness on Wall Street, which came as European leaders held a closely watched summit in Brussels.
Traders were particularly worried about the potential impact of Greece leaving the eurozone after the debt-plagued nation's recent failure to form a government.
The worries about Europe overshadowed a Commerce Department report showing a bigger than expected increase in U.S. new home sales in the month of April.
The report showed that new home sales rose 3.3 percent to an annual rate of 343,000 in April from the revised March rate of 332,000. Economists had expected new home sales to climb to 335,000 from the 328,000 originally reported for the previous month.
The Commerce Department also said that the median sales price of new houses sold in April was $235,700, up 0.7 percent from $234,000 in March and up 4.9 percent from $224,700 a year ago.
However, the substantial rebound by the markets was attributed to reports out of the European summit regarding the steps that the leaders are willing to take to boost economic growth.
A report from Dow Jones said Italian Prime Minister Mario Monti and French President Francois Hollande met ahead of the summit and agreed to consider all possible measures to boost European growth, including euro zone bonds.
Separately, Lou Brien, market strategist at DRW Trading, said the rebound reflected reports that German Chancellor Angela Merkel is advocating a eurozone-wide bank deposit guarantee.
Despite the recovery by the broader markets, Dell (DELL) continued to post a steep loss, with the PC giant tumbling 17.2 percent after reporting weaker than expected first quarter results and providing disappointing second quarter revenue guidance.
Gold stocks showed a substantial turnaround over the course of the trading day after coming under pressure in early trading. After falling by as much as 3.1 percent, the NYSE Arca Gold Bugs Index surged up by 4.1 percent.
While gold for June delivery fell $28.20 to $1,548.40 an ounce, the price of the precious metal moved back to the upside in after-hours trading.
Significant strength also emerged among housing stocks, as reflected by the 1.4 percent gain posted by the Philadelphia Housing Sector Index. Oil service, transportation, and retail stocks also turned higher as the day progressed.
Meanwhile, computer hardware stocks saw continued weakness following the disappointing news from Dell. The NYSE Arca Computer Hardware Index fell by 2.3 percent to a four-month closing low.
Considerable weakness also remained visible among pharmaceutical stocks, as reflected by the 1.2 percent loss posted by the NYSE Arca Pharmaceutical Index. The loss extended a recent downward move by the index, which fell to its worst closing level in five months.
In overseas trading, stock markets across the Asia-Pacific region came under pressure during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 2 percent, while Hong Kong's Hang Seng Index ended the day down by 1.3 percent.
The major European markets also saw significant weakness on the day. While the German DAX Index plummeted 2.3 percent, the French CAC 40 Index and the U.K.'s FTSE 100 Index dove 2.6 percent and 2.5 percent, respectively.
In the bond market, treasuries showed a strong move back to upside after giving back some ground in the two previous sessions. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 7.2 basis points to 1.721 percent.
While any news out of Europe is likely to drive trading on Thursday, traders are also likely to keep an eye on the release of U.S. reports on durable goods orders and weekly jobless claims.
Trading could also be impacted by reaction to earnings news from Hewlett-Packard (HPQ), which has released its quarterly results after the close of today's trading.
by RTT Staff Writer
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