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Wall Street trims “buying” after 3-day rally

Posted on: March 14, 2009


By SARA LEPRO and TIM PARADIS, AP Business Writers – 18 mins ago

NEW YORK – Traders eased off the “buy” button Friday after a massive three-day rally and hunted for clues about whether the market will continue to recover.

Stocks mostly rose in quiet trading Friday after the market shot up in three days as much as it might in some years. The market’s ability to hold the week’s gains was a victory for bullish investors.

Energy stocks weighed on the market ahead of a weekend OPEC meeting on whether the cartel should adjust oil production. Health stocks rose, while financial companies and technology shares wavered after posting big advances this week.

“The biggest question for investors now is, ‘Have we put in the lows and is it safe to get back into the water?’ ” said Michael Sheldon, chief market strategist at RDM Financial Group.

Profit-taking was also damping the market on Friday following the Dow Jones industrials’ surge of nearly 10 percent from Tuesday through Thursday.

The market’s wavering was typical of recent Fridays as traders become reluctant to hold on to large positions ahead of the weekend if negative news could be on the way. This coming weekend is packed of events that could have a great affect on trading next week.

Finance ministers and central bankers from the Group of 20 countries are meeting Friday and Saturday outside London, and Federal Reserve Chairman Ben Bernanke will discuss the financial crisis in a rare interview to be broadcast on CBS’ “60 Minutes” Sunday.

Financial stocks, which led this week’s rally, fluctuated following reports that Citigroup Inc. Chairman Richard Parsons said the bank doesn’t need additional government support. Word that Citigroup, which has received three rounds of emergency funding, was having its best quarter since 2007 touched off the week’s rally on Tuesday.

Bank of America Corp. and JPMorgan Chase & Co. also said this week that they have been profitable so far this year. The market has been quick to embrace the encouraging signs about the financial system after weeks of unrelenting selling spurred on by concerns that the government’s efforts to break a freeze in lending weren’t working.

Despite the glimmers of hope, analysts are still a long way away from declaring that the worst is over.

“We are going to remain cautious because the slightest bit of bad news could turn this thing around,” said Joe Arnold, investment adviser at Dawson Wealth Management.

In late afternoon trading, the Dow Jones industrial average rose 36.40, or 0.5 percent, to 7,206.46. The Standard & Poor’s 500 index rose 3.32, or 0.4 percent, to 754.06, while the technology-heavy Nasdaq composite index fell 4.17, or 0.3 percent, to 1,421.93.

The Russell 2000 index of smaller companies rose 1.78, or 0.5 percent, to 391.90.

About three stocks rose for every two that fell on the New York Stock Exchange, where volume came to 1.01 billion shares.

There was renewed hope Friday for fresh stimulus measures in China and Japan. Chinese Premier Wen Jiabao says the government is ready to roll out even more measures, while Japan’s prime minister is calling for a new stimulus package.

The news, which sent overseas markets surging but met with a less enthusiastic response in the U.S., comes officials from G20 gather. Europeans are calling for greater oversight of financial markets, while the U.S. is backing bigger stimulus spending.

Analysts said technical factors that have helped drive the market this week are continuing Friday, including short-covering, when traders buy stock to cover “short” trades in which they bet a stock will fall.

Upbeat reports from companies in a range of industries lifted stocks this week. General Motors Corp. said Thursday it wouldn’t need the latest installment of government bailout money, and a cut in General Electric Co.’s credit rating on the same day wasn’t as bad as some had feared.

Also feeding optimism about banks this week was news that an accounting board may recommend an easing of financial reporting rules of tough-to-sell assets. Banks say a change in so-called “mark-to-market” accounting rules would help their bottom lines.

Citigroup shares added 13 cents, or 7.8 percent, to $1.80, while Bank of America rose 2 cents to $5.87.

Shares of General Motors extended their gains, jumping 53 cents, or 24.2 percent, to $2.71.

Bonds were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.88 percent from 2.86 percent late Thursday. The yield on the three-month T-bill fell to 0.20 percent from 0.22 percent Thursday.

The dollar fell against other major currencies, while gold prices rose.

Light, sweet crude for April delivery fell $1.10 to $45.93 a barrel on the New York Mercantile Exchange.

Earlier, Britain’s FTSE 100 rose 1.1 percent, Germany’s DAX index slipped 0.7 percent, and France’s CAC-40 rose 0.4 percent. Japan’s Nikkei stock average jumped 5.2 percent.

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