U.S. Markets Spend the Day Treading Water

By BETTINA WASSENER

Published: May 19, 2009

Markets in New York spent Tuesday trading within a narrow range before slipping lower at the close.

Investor enthusism had been tempered somewhat by the latest government report on housing starts.

The Commerce Department reported that housing construction hit a low in April, declining 12.8 percent to a seasonally adjusted annual rate of 458,000 units, the lowest pace on record going back a half-century. Investors also took in disappointing sales at the luxury chain, Saks, and better-than-expected returns at the home-improvement retailer, Home Depot.

At the close, the Dow Jones industrial average was down 29.23 points or 0.3 percent, to 8,474.85. The Standard & Poor’s 500-stock index was 1.58 points or 0.16 percent lower at 908.13, while the Nasdaq was 2.18 points or 0.1 percent higher at 1,734.54.

European shares, which had been higher throughout Tuesday’s session, gave up much of their gains after the release of the housing numbers, but still managed to finish higher. The Dax, in Frankfurt, was significantly higher, trading up 2 percent, while exchanges in London and Paris both rose less than 1 percent.

The lackluster trading in New York came a day after a sense of renewed confidence about the global economy sent the Dow Jones industrial average up 2.8 percent and the Nasdaq by 3.1 percent.

Comments from several top officials in the United States — Treasury Secretary Timothy F. Geithner among them — that the global economy had stabilized were underscored by data released Monday that indicated American home builders’ confidence was beginning to recover.

Monday’s surge on Wall Street carried over Tuesday to stock markets in Asiam where the Nikkei 225, Japan’s leading market index, gained 2.8 percent, and the Hang Seng in Hong Kong and the Kospi index in South Korea both rallied 3 percent.

The Straits Times index in Singapore climbed 3.8 percent. Stocks in Australia rose 2.2 percent, while the Shanghai composite index in mainland China and Taiwan’s Taiex added about 1 percent.

“We’re past a clear inflection point in the markets,” said Patrick Bennett, a strategist at Société Générale in Hong Kong, adding that he saw China, in particular, as a clear “winner” in the current environment.

In Germany, investor confidence improved in May for a seventh month in May, aided by rebound in business orders and a pickup in exports. The Zew index, which assesses investor confidence in Germany, rose to 31.1 points from 13 points in April. But the Zew president, Wolfgang Franz, also had a word of caution.

“With regard merely to the economic activity, more and more signs indicate that the worst seems to be over,” Mr. Franz said. “However, with regard to the labor market development the worst still seems to come”

In Hong Kong, Mr. Bennett also cautioned against excessive optimism, given that much of the data released in recent weeks showed that an actual recovery would probably be feeble and slow.

For example, Mr. Bennett noted that a solid month-on-month rise in Asian exports recorded in February and March appeared to have faltered in April.

Still, for now, investors have regained some appetite for risk.

In India, meanwhile, stocks continued to ride a wave of optimism over the surprisingly decisive victory scored by the governing party, Congress, in the country’s month-long election.

The news caused the Bombay Stock Exchange’s Sensex index to rocket 17 percent Monday, triggering a circuit breaker intended to curb volatility and cutting short that day’s session. On Tuesday, the index added another 1.5 percent .

The election outcome, economists at Citigroup in Mumbai said in a note Tuesday, represents “an almost best-case scenario.”

It should translate into stable government for next five years, a “more reform-oriented agenda with greater policy making flexibility” and “more economic/results-oriented governance” as opposed to what Citigroup described as “the political survival/compromise” nature of recent governance.

In the oil markets on Tuesday, crude oil settled higher, rising 62 cents to end the day at $59.65 a barrel.