Wall Street Halts Stock Sell-Off

Wall Street pulled out of its nose dive Monday, with broad market indexes posting slight gains and the Dow Jones industrial average ending the day with a modest decline.

After the Dow’s 420-point plunge over three days last week, few complained about its 16-point drop Monday. Even so, a day of heavy, zigzag trading suggested that investors were struggling to get a grasp on the economy and corporate earnings.

“There’s a tug of war between those who see a buying opportunity and those who see this as time to move to a more defensive position,” said Tom Hanson, portfolio manager at Pacific Investment Management in Glendale.

The buyers were encouraged by comments from Federal Reserve Gov. Susan Schmidt Bies. Speaking at a business school in Buffalo, N.Y., Bies said the economy was growing at a “solid pace.”

Economic jitters had triggered last week’s sell-off. Retail sales figures came in below expectations Wednesday, suggesting that high energy prices were finally crimping consumer spending -- which accounts for two-thirds of the nation’s economy. The slide snowballed Friday after IBM reported disappointing quarterly profit; the Dow plunged more than 190 points.

When trading resumed Monday, some investors saw the stock market as “deeply oversold” and due for a reversal, Hanson said. But buyers ran up against sellers equally convinced that negative sentiment could carry market indexes back to their 2004 lows, when the Dow fell below 10,000.

The Dow lost 16.26 points, or 0.2%, to 10,071.25. The Standard & Poor’s 500 index gained 3.36 points, or 0.3%, to 1,145.98, while the technology-heavy Nasdaq composite added 4.77 points, or 0.3%, to 1,912.92.

Winners outnumbered losers by about 3 to 2 on the New York Stock Exchange.

Oil continued its downward trend, easing 12 cents to $50.37 a barrel. The Dow transportation average rallied 0.7%, which some strategists took as a sign that oil prices could be stabilizing.

Investors are paying close attention to corporate earnings reports this week. Monday’s clues were mixed: Bank of America posted robust profit, but Dow component 3M reported a modest shortfall in sales.

Today, Intel, Merrill Lynch and Coca-Cola are expected to release first-quarter figures.

Strong corporate profits from these and other companies would put Wall Street in a better mood, but rising interest rates, or another jump in oil prices, could still emerge as spoilers.

Last week’s market jolt probably removed the distant possibility that the Fed would boost rates by half a point when its policymaking committee meets next month, economists said. Still, they expect the Fed to continue tightening credit for the near term. The economy probably grew about 3.5% to 4% in the first quarter, analysts said, a solid rate given high oil prices.

“While it’s clear that the economy is starting to feel the effects of rising oil costs, we’re not there yet in terms of growth slowing sufficiently to move the Fed to the sidelines,” said Gary Schlossberg, senior economist at Wells Capital Management.

Rate hikes may cease as autumn approaches, especially if oil prices stay relatively high, experts said. “I doubt the economy will warrant tightening much past the summer,” said Jeffrey Rubin, chief economist at CIBC World Markets.

Market pros also will be watching a slew of data coming out this week, including inflation figures today and Wednesday and jobless claims Thursday.

“This market has been manic-depressive all year long,” said Jim Paulsen, chief investment strategist at Wells Capital Management, pointing to Wall Street’s steep drop early this year. “I’m not so sure that we’re slowing [economically], or that the market is just in this manic-depressive mode and on the depressive side of it.”

In Monday’s market highlights:

* 3M sank $4.96 to $75.90 after the maker of Scotch tape and Post-it notes reported better-than-expected quarterly earnings but a decline in sales.

* BofA climbed 45 cents to $44.73 on its earnings. SunTrust Banks also reported strong results, and it rose $1.04 to $71.20.

* Foreign markets fell hard in the aftermath of last week’s U.S. rout. Japan’s Nikkei 225 index lost 3.8%, and in Germany the DAX fell 2.6%.

* Oil stocks helped bolster the U.S. equity market despite the drop in crude futures. Exxon Mobil gained $1.06 to $57.25.

* In the Treasury market, the yield on the benchmark 10-year T-note rose to 4.28% from 4.24% on Friday.