US stocks fell in a choppy session yesterday but showed resilience in the face of Europe’s debt crisis, recovering some of their losses on more encouraging signs from the US economy.
The Eurozone’s troubles showed no signs of abating as news that Portugal could be downgraded reignited selling in a high-volume flurry at the close.
Earlier, the S&P 500 had erased much of a 1 per cent loss after improved consumer confidence and manufacturing data.
With Europe engaged in ad hoc crisis management for much of the year, investors are torn between that and signs of US economic strength and below-average equity valuations.
“You do have a bit of a tug of war between those investors who see the environment as positive for equities over the intermediate to long-term (and) traders who are more concerned about the short-term impact of European debt concerns,” said Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York.
Consumer discretionary stocks were among the better performers after the Conference Board reported US consumer confidence rose to its highest level in five months. Retailer Gap rose 3.1 per cent to $21.36, while Tiffany & Co added 2.4 per cent to $62.10.
Improved consumer sentiment as well as stronger US Midwest business activity are the latest in a series of reports that have made investors more optimistic before Friday’s November unemployment report and as the holiday spending season gets underway.
“I think we’ll see a rally into year-end,” said Ghriskey, who expects the S&P 500 to rise to 1,225 by year-end.
In another tailwind for stocks, US President Barack Obama said he would attempt to negotiate a deal with Republicans on tax policy in the coming days, potentially opening the way for an extension to breaks on capital gains and dividend taxes.
The Dow Jones industrial average dropped 46.47 points, or 0.42 per cent, to 11,006.02. The Standard & Poor’s 500 Index fell 7.21 points, or 0.61 per cent, to 1,180.55. The Nasdaq Composite Index lost 26.99 points, or 1.07 per cent, to 2,498.23.