Stock market rebounds from worst day of the year
NEW YORK (AP) — Strong housing and earnings reports helped stocks rebound from their worst day of the year.
The Dow Jones industrial average rose 157.58 points, or 1.1 percent, on Tuesday, to 14,756.78, winning back more than half of the 265 points it lost a day earlier. The Standard & Poor’s 500 index logged its second-best day of the year.
Home construction topped 1 million last month, the highest level since June 2008. Robust earnings from companies including Coca-Cola also propelled the market higher.
A recovery in housing and a pickup in hiring were major catalysts driving the stock market’s surge early this year. The Dow and the S&P 500 jumped 11.3 percent and 10.3 percent, respectively, in the first three months of 2013.
That run-up was interrupted Monday when stocks had their biggest decline since November. Worries about an economic slowdown in China led to a drop in prices for oil, copper, and other commodities, causing mining and energy stocks to fall. The rally had already slowed earlier this month after reports of weak hiring and retail sales suggested that the economy was cooling off.
“This is the first time in a while that we’ve had pretty positive numbers,” said JJ Kinahan, chief derivatives strategist for TD Ameritrade. “We had one bad day yesterday. You can’t say because of that one bad day that all bets are off.”
While Chinese growth fell short of expectations, Monday’s sell-off may have been disproportionate to the slight slowdown in China’s growth.
The world’s biggest economy still expanded at a rate of 7.7 percent in the first three months of the year, slowing from 7.9 percent the previous quarter and missing analysts’ expectations by just 0.3 percentage points. China is watched especially closely because it is a major market for foreign goods from iron ore to smartphones and is relatively healthy. Investors hope demand from China can help offset weakness in the U.S., Europe and Japan.
Mining companies rose Tuesday as commodities markets stabilized and materials stocks gained the most of the 10 industry groups in the S&P 500 after leading the market lower the day before. Home builders advanced following the housing report. PulteGroup rose 75 cents, or 4.2 percent, to $18.60 and Lennar climbed 92 cents, or 2.4 percent, to $38.70.
The S&P 500 climbed 22.2 points, or 1.4 percent, to 1,574.57. It was the biggest gain since Jan. 2, when stocks rallied after lawmakers reached a last-minute deal to stop a series sweeping tax hikes and spending cuts from taking effect.
Gold, which was at the epicenter of Monday’s sell-off, rose $26.30 to $1,387.40 an ounce, a gain of 1.9 percent.
The precious metal logged its steepest fall in 30 years Monday, plunging $140 an ounce, or 9 percent. Gold had been drifting lower since the start of the year and the decline accelerated Friday after the government reported a drop in inflation. People often buy gold when they’re fearful of rising prices and sell it when they see inflation ebbing.
Gold is down 27 percent since it climbed to a record in August 2011, when lawmakers wrangled over raising the debt ceiling and threatened to push the U.S. into default.
Investors should expect a more volatile stock market until there is more confirmation that the economy is strengthening and the outlook for companies is improving, said Jeff Morris, head of U.S. equities at Standard Life Investment.
“Until we get evidence of more robust conditions in the second half we’re going to be in more of a sideways market,” said Morris. “You saw a fairly dramatic move yesterday; that’s indicative of a market that’s not quite sure of which direction to go.”
While the Dow is up this month, the pace of gains is slowing and the index is on track to log its weakest month of the year. The Dow has risen 1.2 percent in the first two weeks of April, compared to an average monthly gain of 3.6 percent in the first quarter.
Small company stocks rose more than the broader market Tuesday, a sign that investors are moving money into riskier assets. The Russell 2000 index climbed or 1.8 percent to 922.30. That’s a reversal from the day before, when the index plunged 3.8 percent.
In other trading, the Nasdaq composite rose 48.14 points, or 1.5 percent, to 3,264.63.
Yields on U.S. government bonds rose as investors moved money out of safe-haven investments. The yield on the benchmark 10-year Treasury note climbed to 1.72 percent from 1.68 percent.
Among stocks that made big moves:
Coca-Cola gained $2.28, or 5.7 percent, to $42.37 after its first-quarter results came in above Wall Street’s forecasts. Coke said it struck a deal to start refranchising its business in the U.S., which will lower costs.
W.W. Grainger Inc., which sells power tools and other industrial equipment, rose $16.18, or 16.2 percent, to $241.88 after the company said its first-quarter net income climbed 13 percent.
U.S. Bancorp logged the biggest decline in the S&P 500. The lender dropped 59 cents, or 1.8 percent, to $32.72 after it reported first-quarter earnings that fell short of analysts’ expectations. The Minneapolis bank’s net income rose 7 percent to $1.43 billion as it set aside less cash to cover soured loans.
Whirlpool Corp. jumped $3.66 to $116.78 after the appliance maker raised its quarterly dividend 25 percent to 62.5 cents.
Smithsonian to close galleries due to budget cuts
WASHINGTON (AP) — Budget cuts from Congress will soon reduce the number of free exhibitions on view each day at the Smithsonian Institution and will furlough U.S. Park Police officers who guard the nation’s monuments.
Smithsonian Secretary Wayne Clough (CLUFF) testified Tuesday in Congress that the museum complex must reduce its security contract for gallery attendants because of budget cuts. As a result, the Smithsonian plans to begin rolling gallery closures after May 1.
Clough says the Smithsonian will likely postpone or cancel some exhibits for 2014.
The Smithsonian had to reduce its budget by $41 million due to across-the-board cuts imposed by Congress. Separately, the National Archives saw a $20 million cut and already reduced its operating hours.
The National Park Service is making $153 million in cuts, leading to police furloughs.
American Airlines fixes computers, delays go on
DALLAS (AP) — American Airlines grounded all flights across the United States for several hours Tuesday after a key computer system crashed, causing thousands of passengers to be stranded at airports and on planes.
Flights in the air were allowed to continue to their destinations, but planes on the ground could not take off.
The airline blamed its computerized reservation system, which is used for much more than booking flights. Airlines use such systems to track passengers and bags, monitor who has boarded a plane and to update flight schedules and gate assignments and file flight plans.
The failure caused cascading delays and cancelations nationwide.
As of mid-afternoon, American and its American Eagle offshoot canceled more than 700 flights and another 765 flights were delayed, according to tracking service FlightAware.
The outage began in midmorning stretched into the afternoon. The systems were fixed by 4:30 p.m., airline spokeswoman Stacey Frantz said.
But even as some flights took off, the airline expected delays and cancellations to continue for the rest of the day.
At airports, customers whose flights were canceled couldn’t rebook on a later flight. Passengers already at the airport were stuck in long lines or killed time in gate areas. They described frustration at the lack of information from airline employees.
“Tensions are high. A lot of people are getting mad. I’ve seen several yelling at the American agents,” said Julie Burch, a business-meeting speaker who was stuck at Dallas-Fort Worth International Airport waiting for a flight to Denver. “Nobody can tell us anything.”
Terry Anzur, a TV news consultant from Los Angeles who was also stranded in Dallas, said American Airlines gate employees were doing everything the old-fashioned, manual way because their computers were useless.
“No one at the counter can do anything. They can’t check people in,” Anzur said. “The airline is at a dead halt.”
American’s problems on Tuesday were reminiscent of what United Airlines passengers endured for several days last year. After merging with Continental, United experienced computer glitches in the combined reservation system. On one day in August, 580 United flights were delayed, and its website was shut down for two hours. Another outage in November delayed 636 flights.
The problems prompted an apology from United Continental Holdings Inc. CEO Jeff Smisek, who acknowledged that the airline had frustrated customers and would need to work to win them back.
United’s technology glitches arose after a merger, but American’s headache occurred as parent company AMR Corp. seeks government approval to merge with US Airways Group Inc. A merger would let American leapfrog United and become the world’s biggest airline.
The combined American-US Airways plans to use the American system that broke down on Tuesday.
Passengers used social media to flood the airline with complaints. The airline tweeted back that it was working to fix the problem, and it apologized for the inconvenience.
To make amends, American offered to book people who needed to travel Tuesday on another airline and pay for the fare difference. For those who wanted to delay their trips, American offered refunds or waivers from the usual fee for changing a reservation.
But for several hours, the airline wasn’t able to process those changes and refunds because the reservations system was down.