MARKET REPORT

Thrifty investors bump up stocks

Trader Kevin Lodewick works Tuesday on the floor of the New York Stock Exchange.
Trader Kevin Lodewick works Tuesday on the floor of the New York Stock Exchange.

Investors went hunting for bargains Tuesday, a day after U.S. stocks racked up the biggest losses in more than seven months.

The buying helped lift major stock indexes out of the red Tuesday.

The Dow rose 72.44 points, or 0.47 percent, to close at 15,445.24 Tuesday. The Standard & Poor’s 500 index climbed 13.31 points, or 0.76 percent, to 1,755.20. The Nasdaq composite gained 34.56 points, or 0.86 percent, to 4,031.52.

The rebound seemed fragile at times, with the market giving up some of its earlier gains by late afternoon.

Markets were coming off a 326-point drop in the Dow Jones industrial average Monday, the blue-chip index’s worst January performance in five years, prompted by disappointing news about U.S. manufacturing.

“It was the biggest hole we’ve seen for quite a bit, so it’s not surprising to see a green day after a couple days of red,” said Andres Garcia-Amaya, a global market strategist with J.P. Morgan Funds.

Portfolio managers seized on the aftermath of Monday’s sell-off, even as many stock watchers acknowledged that the market could still be due for a drop of at least 10 percent, known as a correction.

“The one thing you never know is when the bottom is going to hit in a downturn,” said Quincy Krosby, a market strategist with Prudential Financial. “So what you might do is at least begin the process of building your position.”

Even with Tuesday’s gains, the Dow is down 6.8 percent this year, and the S&P 500 index is off 5 percent.

Investors are trying to gauge the strength of the U.S. economic recovery. They got some positive news Tuesday, when the Commerce Department reported that orders to U.S. factories fell 1.5 percent in December, as aircraft orders plunged. That’s the biggest drop since July, but it was less than anticipated.

On Monday, the Institute for Supply Management said its index of manufacturing activity fell to 51.3 in January, the lowest reading since May. That unnerved investors already worried about signs of a slowdown in the global economy.

Whether Tuesday’s market uptick gains momentum or gives way to another sell-off may depend on what the government’s latest jobs report says Friday.

Employers added just 74,000 jobs in December, the fewest in three years and far below the average of 214,000 added in the previous four months. The consensus forecast for January calls for hiring to rebound to 170,000, according to FactSet.

“These numbers are very subject to revisions, and it would be comforting for investors to see that [December] number revised upward,” Krosby said. “It would console investors that the economy has not lost momentum.”

Between now and then, Wall Street will parse company earnings for more clues about the economy’s health.

“For the next couple of days, I think the volatility remains,” said David Chalupnik, head of equities for Nuveen Asset Management.

Investors rewarded some companies that reported earnings Tuesday.

Michael Kors jumped $13.24, or 17.3 percent, to $89.91 after the fashion retailer reported stronger results.

Yum! Brands jumped $5.90, or 9 percent, to $72.06 after the owner of KFC reported better-than-expected earnings late Monday. It also indicated it remains confident about its earnings growth forecast for the year.

Water technology provider Xylem rose $3.47, or 11 percent, to $36.27, after it reported better-than-anticipated results for its fourth quarter.

Business, Pages 26 on 02/05/2014

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