NEW YORK – A bounce back in materials and financial companies erased early losses in the stock market Monday.
Commodities like corn and cotton rose than 3 percent in midday trading, in part because of a slide in the dollar that sent the prices of raw materials higher. Most commodities are priced in dollars so when the dollar falls against other currencies, the price of the commodities goes up to reflect that. Those gains helped send material companies — such as United States Steel and Cliffs Natural Resources — up 1.3 percent, the most of any industry group in the S&P 500 index. Oil was among the few commodities that did not rise, falling 0.5 percent to remain below $100 a barrel. The drop sent airline companies like Delta and Jet Blue up more than 2 percent.
Commodities have fallen broadly over the last two weeks because of concerns that the global economy is showing signs of weakening. A series of margin-hikes that were meant to curb the influence of speculators, whose heavy trading sent commodities like silver up more than 11 percent for the year, have also sent commodities lower.
"People are coming back into the commodity markets because they think that in the back of their minds the global growth story will continue," said Zahid Siddique, an associate portfolio manager at Gabelli Equity Trust, a money manager based in New York.
The Dow rose 11 points, or 0.1 percent, to 12,606 in midday trading. The S&P 500 fell less than a point to 1,337. The Nasdaq composite fell 22, or 0.8 percent, to 2,806.The Dow had been down as much as 50 points in early trading Monday.
The U.S. stock market has lost some of its momentum in the last few weeks after finishing its best first quarter since 1998. Companies in so-called defensive industries like health care, utilities and consumer staples have outperformed lately due in part to concerns that high gas prices will slow the economy and cut into corporate profits.
Investors are growing increasingly concerned over the prospect of an unprecedented U.S. default on its debt as well. Treasury Secretary Timothy Geithner told Congressional lawmakers in a letter Monday that the agency is taking steps, including accounting measures and halting investments in two government pension plans, to postpone hitting the federal debt limit until August.
"The main thing hanging over most financial markets right now is what's going to happen with the debt ceiling and government borrowing and spending," said Tim Courtney, the chief investment officer at Burns Advisory Group in Oklahoma City.
Two well-known retailers in the U.S. fell after reporting quarterly results Monday. Home improvement company Lowe's Cos. fell 2 percent in after its quarterly report missed Wall Street's estimates and the company cut its outlook for the year. The company said that its profit fell 6 percent in the first quarter because of the combination of bad weather and a decline in consumer spending. J.C. Penny Co. Inc. lost 1.5 percent despite raising its full year profit estimates.
One of the most talked-about deals on Wall Street was officially nixed as well. The parent company of the New York Stock Exchange dropped nearly 11 percent after competitors Nasdaq OMX Group and ICE announced that they had withdrawn their hostile bid for the company. NYSE Euronext had angered its shareholders by refusing to meet with the two companies, which offered a higher price than what NYSE received from a German exchange operator. The withdrawn offer clears one hurdle to the proposed combination of the NYSE and its German counterpart.
Stocks in Europe fell broadly after the arrest of the head of the IMF in New York on charges he sexually attacked a hotel maid. The official, Dominique Strauss-Kahn, had been heavily involved in trying to solve the debt crises in Portugal and Greece. The Euro Stoxx 50, an index of large companies in countries that use the euro, lost 0.5 percent. Greece's stock market fell nearly 2 percent.
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