Stocks lose steam, turn negative in afternoon trading as financials retreat

Stocks waver, Dow gives up triple-digit gain

NEW YORK — Stocks ended higher but well off their best levels of the day as volatility continued to tug at the market.

Stocks jumped early Monday after strong reports on manufacturing and housing but were fluctuating by the afternoon. The Dow Jones industrial average ended up 77 points after being up as much as 146 points.

The market has been volatile in recent days as investors try to determine whether the bets they’ve been placing on a rebound in the economy over the past several months are still sound.

The worry is that the pace of recovery the market has been counting on may be hard to maintain. The government reported 3.5 percent growth in third-quarter GDP last week but much of that growth came from government spending. Likewise many companies are reporting stronger than expected earnings, but many of those gains came from cost-cutting instead of higher sales.

The seesaw trade on Monday came after the Institute for Supply Management reported that manufacturing activity grew in October at the fastest pace since April 2006. The ISM index clocked in at 55.7, much better than the 53 economists had expected. It was the third month in a row the index came in above 50, which indicates growth.

Meanwhile, the National Association of Realtors said pending home sales increased for the eighth straight month in September. The index rose 6.1 percent from August to 110.1. It was the highest reading since December 2006 and more than 21 percent above a year ago. Economists had expected the index would be level at 103.8.

Stocks had posted their biggest losses in four months on Friday after rising sharply a day earlier on the stronger-than-expected GDP figures. Friday’s losses helped send the Standard & Poor’s 500 index into the red for October, breaking a seven-month streak of gains.

Even with the S&P 500’s 2 percent loss in October, the index is still up 53.2 percent since hitting a 12-year low in March.

“The question is, is the trend changing?” said Jim Dunigan, managing executive of investments at PNC Wealth Management. “We’ve been in an up trend here.”

According to prelminary calculations, the Dow rose 76.71, or 0.8 percent, to 9,789.44. The Standard & Poor’s 500 index rose 6.69, or 0.7 percent, to 1,042.88, and the Nasdaq composite index rose 4.09, or 0.2 percent, to 2,049.20.

Advancing stocks narrowly outpaced those that fell on the New York Stock Exchange, where volume came to 1.5 billion shares, compared with 1.7 billion Friday.

Trading is likely to be volatile again this week as investors sift through a flood of economic data, including the government’s monthly employment report on Friday. The Federal Reserve will also weigh in on the economy after the conclusion of a two-day policy meeting on Wednesday.

Bond prices fell. The yield on the benchmark 10-year Treasury note rose to 3.43 percent from 3.39 percent late Friday.

The dollar fell against most other major currencies, sending commodity prices higher. Oil rose $1.13 to settle at $78.13, while gold rose on the New York Mercantile Exchange.

In other trading, the Russell 2000 index of smaller companies slipped 0.37, or 0.4 percent, to 562.40.

Overseas, Britain’s FTSE 100 rose 1.2 percent, Germany’s DAX index added 0.3 percent, and France’s CAC-40 rose 0.9 percent. Japan’s Nikkei stock average dropped 2.3 percent.