Stock rally fades after key indexes near recent highs
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The stock market tried to bust out of its box Wednesday but failed.
Stocks closed broadly higher but pulled back in late trading after blue-chip indexes were unable to break decisively through their recent trading range.
The Dow Jones industrial average rose as high as 11,624, up 208 points for the day, but closed up 102.55 points, or 0.9%, to 11,518.85.
At its highs for the session the Dow had erased its net loss for the year, but at the close it was off 0.5% year to date.
The rally had been sparked in part by fresh hopes that European policymakers finally were serious about ring-fencing their debt crisis. European Commission President Jose Manuel Barroso proposed guidelines for recapitalizing the continent’s banks, a move seen as crucial ahead of whatever losses lenders are forced to absorb on their holdings of Greek government bonds.
Major European stock market indexes rose 2% to 3% for the day. The German market now has risen for six straight sessions, for a total gain of 15% in that period.
On Wall Street, investors and traders have been shifting back to stocks since the market hit new lows for the year on Oct. 3. Optimism about Europe has helped, as have economic data that suggest the U.S. isn’t in danger of falling back into recession.
Stocks plunged in late July and early August on fears about the economy and Europe. Since then the U.S. market has been in a trading range. The Standard & Poor’s 500 index (charted at left), for example, has mostly bounced between 1,100 and 1,220, a range of 11%, since Aug. 8.
Bulls have been hoping to see the S&P shoot above 1,220 and hold its gains, which could convince more investors and traders that the market was beginning a new leg up. But after reaching 1,220.25 on Wednesday, the rally lost steam. The S&P closed up 11.71 points, or 1%, to 1,207.25, its highest since Sept. 16.
‘It tried to break through but couldn’t,’ said Larry Peruzzi, senior trader at Cabrera Capital Markets in Boston. ‘It still feels like a sideways market.’
Still, that’s better than another collapse. This market has been no fun, but it isn’t 2008 -- although saying as much probably is just tempting fate.
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-- Tom Petruno
Follow me on Twitter: Twitter.com/tpetruno
Chart credit: Bloomberg News