Dow Closes Up 8, Nasdaq Finishes Down 6

The Associated Press
Thursday, June 8, 2006; 6:06 PM

NEW YORK -- Wall Street recovered from an earlier plunge to finish narrowly mixed Thursday as investors attempted to rally from a week of losses fueled by concerns that higher interest rates will strain the global economy.

Persistent inflation and rate worries pushed stocks substantially lower during the session, with the Dow Jones industrials dropping more than 173 points at midday. But bargain hunters entered the market late in the day and took advantage of relatively cheap stock prices.

The market's comeback helped draw attention from rate increases by the European Central Bank, South Korea and India. This week's signals that the Federal Reserve would sacrifice economic growth to keep boosting rates and stem inflation saddled U.S. stocks and led steep declines in markets worldwide.

"The heavy trading volume today was a good indication that we were nearing the end of this decline," said Peter Cardillo, chief strategist at S.W. Bach & Co. "I think the market is probably going to begin to stabilize over the next couple of days."

Oil prices dipped following the death of Iraq's main terrorist leader, and the U.S. dollar gained ground against the Japanese yen. However, investors were kept on edge by an inversion of short- and long-term bond yields.

At the close, the Dow rose 7.92, or 0.07 percent, to 10,938.82. The Dow lost almost 330 points from Friday through Wednesday.

Broader stock indicators recouped earlier losses and ended mixed. The Standard & Poor's 500 index added 1.78, or 0.14 percent, to 1,257.93, while the Nasdaq composite index fell 6.48, or 0.3 percent, to 2,145.32.

Declining issues outpaced advancers by about 3 to 2 on the New York Stock Exchange, where preliminary consolidated volume of 3.65 billion shares handily beat the 2.68 billion shares that changed hands on Wednesday.

A jittery bond market added to Wall Street's uncertainty as short-term yields overtook long-term rates for the first time since March, a sign of weakening confidence in holding long-term debt. The yield on the 10-year Treasury note slid to 5.01 percent from 5.02 percent late Wednesday, while the 2-year Treasury yield stayed flat at 5.01 percent.

Elsewhere, the U.S. dollar jumped against the Japanese yen but was flat versus European currencies, and gold prices tailed off to about $615 an ounce. The death of the al-Qaida leader in Iraq and easing political tensions in Nigeria and Iran sent a barrel of light crude tumbling 47 cents to $70.35 on the New York Mercantile Exchange.

Fears that higher interest rates will hinder global demand haunted overseas stock markets. Japan's Nikkei stock average plunged 3.07 percent; Britain's FTSE 100 sank 2.51 percent, Germany's DAX index dropped 2.9 percent and France's CAC-40 was lower by 2.91 percent.

The lack of economic news this week left investors with virtually no direction on the economy and whether the Fed will prolong its program of rate hikes at its June 28-29 policy meeting. Next week's reports on wholesale and consumer prices should bring evidence of whether surging energy costs have driven up prices in other areas _ the Fed's chief reason for continuing to raise lending rates.

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