Wednesday Stocks Rebound from Slide on Manufacturing Data

Dow now at 9,762, up 20 points.

NEW YORK (AP) — Investors shook off their disappointment with a weak regional economic report Wednesday and resumed buying stocks on the final day of a stellar quarter.
The Dow Jones industrials initially fell more than 100 points after the Chicago Purchasing Managers Index came in weaker than expected. But by early afternoon, buyers emerged and lifted stocks, sending the Dow up about 20.
It was fitting that on the last day of the quarter, the market followed a pattern seen throughout this year’s rally. When bad news hits the market, reminding investors of the economy’s fragility, stocks slide. But within a few days, or even the same day, they start to recover as investors seem to grab hold of the fact that no one expects the recovery, or stocks, to have an unbroken path upward.
The Chicago PMI fell to 46.1 in September rather than rising to the 52 that economists expected. The index, considered a precursor to the national Institute for Supply Management index to be released on Thursday, pointed to a Midwestern manufacturing industry than is weaker than had been expected.
The market had more encouraging news earlier, an upward revision in the Commerce Department’s reading for the second-quarter gross domestic product. The government said the GDP, the broadest measure of the economy, sank at a pace of just 0.7 percent in the spring. The new reading was better than the annualized 1.1 percent drop that economists were predicting.
But the Chicago PMI data were fresher, and therefore more troubling, than the GDP. And it reminded investors that the economy still has major obstacles to be overcome before a solid recovery can occur.
In early afternoon trading, the Dow rose 19.96, or 0.2 percent, to 9,762.16. The index had been down nearly 134 points at its low of the day.
The broader Standard & Poor’s 500 index rose 2.60, or 0.3 percent, to 1,063.21. The Nasdaq composite index rose 12.67, or 0.6 percent, to 2,136.71.
Advancing stocks narrowly outpaced those that fell on the New York Stock Exchange, where volume came to 652.9 million shares compared with 562.3 million shares traded at the same point Tuesday.
The market was uneasy ahead of Friday’s September employment report from the Labor Department.
A snapshot Wednesday on employment showed some modest improvement in the labor market. The ADP National Employment Report found that private sector employment fell by 254,000 in September following a revised loss of 277,000 jobs in August. It was the fewest jobs lost since July 2008.
Traders are waiting to see whether there will be a significant drop in the number of jobs cut nationwide during September. Investors also are concerned about the unemployment rate. Economists predict the unemployment rate rose to 9.8 percent in September from 9.7 percent a month earlier.
The market could have trouble continuing its advance if economic reports don’t boost optimism.
Steve Hagenbuckle, managing principal for TerraCap Partners in New York, expects that corporate earnings will likely exceed expectations again in the third quarter and help boost the market.
“The corporate numbers will continue to be met or exceeded so I think we’ll continue to run up,” he said. “I don’t think this is a major pullback.”
The stock market has had a robust third quarter as investors have been betting on an economic recovery. However, as the Chicago PMI showed, there are still many vulnerable spots in the economy that can stall the rally that began in March.
Through Tuesday, the benchmark S&P 500 index gained 56.8 percent since hitting a 12-year low in March, and for the quarter, the S&P 500 and Dow were both up more than 15 percent.
Investors also worried about commercial lender CIT Group Inc., which is preparing an exchange offer that would eliminate as much as 40 percent of its more than $30 billion in outstanding debt, according to The Wall Street Journal, which cited anonymous sources. The exchange give control of the company to its bondholders and wipe out common stockholders, according to the report.
The stock fell 79 cents, or 35.9 percent, to $1.41.
Meanwhile, bond prices were little changed Wednesday but recovered from earlier losses following the Chicago PMI report. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.32 percent from 3.29 percent late Tuesday.
The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude rose $2.90 to $69.61 a barrel on the New York Mercantile Exchange.
The Russell 2000 index of smaller companies fell 0.44, or 0.1 percent, to 610.01.
Overseas, Japan’s Nikkei stock average rose 0.3 percent. Britain’s FTSE 100 fell 0.5 percent, Germany’s DAX index lost 0.7 percent, and France’s CAC-40 fell 0.5 percent.