Stocks came off their lows but remained mired in negative territory as yields on Italian bonds held higher, underscoring persistent worries around the debt crisis.
NEW YORK (TheStreet) -- Stocks came off their lows but remained mired in negative territory as yields on Italian bonds held higher, underscoring persistent worries around the debt crisis.
The Dow Jones Industrial Average was down 61 points, or 0.5%, to 12,036 after losing more than 100 points earlier. The index, which has finished up three of the last four trading sessions, tacked on 17 points on Tuesday amid light trading volumes.
The Nasdaq was off 11 points, or 0.4%, at 2676. The S&P 500 was last down 5 points, or 0.4%, at 1253.
"The S&P is meeting various levels of resistance, so the market has been stalling the last week and a half" said Ryan Detrick, technical strategist with Schaeffer's Investment Research. Detrick explained that the index has been dancing around 1260, a key technical support level. He also noted that the S&P 500 is trading just below its year-to-date breakeven level of 1257, as well as below its 200-day moving average of 1270. Analysts consider a break above the average as a bullish sign.
With the European Central Bank still refusing to act as a lender of last resort, contagion in Europe's bond market threatens to engulf the eurozone's largest economies. Yields on Italian 10-year bonds were back above 7% after an intervention by the European Central Bank to buy up sovereign debt pushed yields briefly below the key threshold in the morning.
Investors are nervous that the debt crisis has entered a new, more dire stage given the rising borrowing costs in France and Spain. A downgrade of France, which currently holds a triple A credit rating, would further erode the market's confidence in Europe's emergency rescue fund.
Meanwhile, German Chancellor Angela Merkel reiterated on Wednesday that Germany will resist pressure for the central bank to take a bigger role in stemming the debt crisis. Also weighing down sentiment was a grim outlook for economic growth in the U.K. from the Bank of England. Bank of England Governor Mervyn King said Britain's economy could remain flat until mid-2012 and that he did not know how Europe would resolve its debt crisis. Bank of Japan Governor Masaaki Shirakawa said that Europe's woes are affecting emerging nations and Japan.
Signs that Italy is taking its debt problems more seriously did little to lift stocks. Italy's Mario Monti formed a new government on Wednesday, bringing the country closer to staving off a potential default. However, investors are hoping that Italy will show further political willpower than a shift in leadership.
On Wednesday, oil prices climbed back above $100 a barrel for the first time since early June. The December crude oil contract was gaining $2.11 to $101.48 a barrel. In other commodities, gold for December delivery was down $12.50 to trade at $1769.70 an ounce on Monday
"Most of the talk today is about higher oil prices," said Detrick at Schaeffer's, adding that airline companies were facing pressure. United Continental(:UAL), Delta Air Lines(:DAL) and US Airways(:LCC) were falling by 2.5%, 2.4% and 1.5%, respectively
Better than expected economic data out of the U.S. kept losses in check. Industrial production rose 0.7% in October, according to the Federal Reserve. The reading was better than the 0.4% increase analysts expected, although the previous month's production figure was revised from a 0.2% gain to a 0.1% decline. Capacity utilization came in at 77.8%, slightly higher than forecast and up from 77.4% in the prior month.
Confidence amongst U.S. home builders rose in November, according to the National Association of Home Builders' housing market index, which rose to a level of 20 in November. The reading, although still low, was the best since May of 2010 and surpassed the consensus forecast for the level to stick at 18.
The consumer price index edged down 0.1% in October, a welcome surprise given that economists expected the level to sit tight after increasing 0.3% in September. Excluding food and energy, inflation rose 0.1%, in line with expectations.
Signs of easing inflation may give the Federal Reserve more leeway to further stimulate the economy if needed. Market participants often meet the possibility with enthusiasm but as David Semmens, economist with Standard Chartered Bank, notes, "this is Fed friendly data but is going to do little to sway the market one way or the other right now given the focus on Europe."
European stocks closed lower with London's FTSE off 0.15% and Germany's DAX slipping 0.33%. Overnight, Asian stocks fell for a second day. Japan's Nikkei Average lost 0.92% and Hong Kong's Hang Seng closed down 2%.
In corporate news, Target(:TGT) was gaining 1.2% after its third-quarter profit topped estimates. The discount retailer earned $555 or 82 cents per share, compared to the forecasted 74 cents per share by analysts, as it expanded its food selection and offered a discount to cardholders.
Abercrombie & Fitch(:ANF) was tumbling 14.1% after reporting third-quarter earnings of 57 cents a share, below the average analyst estimate of 71 cents a share.
Dell(:DELL) was losing 2.4% after it beat third-quarter earnings estimates but failed to meet analysts' expectations on revenue. Dell, the world's third-largest PC maker, reported adjusted earnings of 54 cents a share on revenue of $15.4 billion. Analysts were expecting earnings of 47 cents on revenue of $15.7 billion.
Citigroup(:C) was slipping by 2.3%. The bank is preparing to eliminate 900 jobs in its securities and banking division, or about 5% of the unit's worldwide staff, according to the The Wall Street Journal.
Apple(:AAPL) appointed Art Levinson as its new chairman, a role held by Steve Jobs before his death last month. Levinson, the chairman of Genentech, has been a co-lead of Apple's board since 2005, but will now serve as non-executive chairman. Apple also said Walt Disney(:DIS) CEO Robert Iger will join its board. Shares were down 0.3%.
American Airlines parent AMR(:AMR) was losing 5.5% after failing to reach a cost-saving agreement with its pilots. The lack of a deal raises the possibility that AMR will file for bankruptcy.
The euro was falling to a five-week low against the dollar which was strengthening by 0.13% compared to a basket of currencies. In the bond market, 10-year Treasuries were gaining 8/32, diluting the yield to 2.02%.
-- Written by Chao Deng in New York.