U.S. stocks, euro recover on bargain-hunting

By Jennifer Ablan

NEW YORK (BestGrowthStock) – U.S. stocks (Read more about the stock market today. ) staged a late-day comeback on Monday, reversing a 184-point drop, as the euro’s rebound from a four-year low temporarily offset fears that euro-zone austerity measures could stifle global growth.

Given the euro zone’s debt problems, the euro has become a proxy for risk appetite, rising and falling in tandem with U.S. stocks (Read more about the stock market today. ).

The Dow Jones industrial average (.DJI: ) finished up 5.67 points, or 0.05 percent, at 10,625.83, while the benchmark Standard & Poor’s 500 Index (.SPX: ) was up 1.26 points, or 0.11 percent, at 1,136.94. The Nasdaq Composite Index (.IXIC: ) was up 7.38 points, or 0.31 percent, at 2,354.23.

“Things got a little oversold and things were getting a little overdone on the downside recently,” said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

Front month June crude oil also pared losses. U.S. light sweet crude oil settled down $1.53, or 2.14 percent, to $70.08 per barrel.

The euro slid to a four-year low at one point before rebounding, helping take indexes down more than 1 percent earlier in the day as investors fretted that the steps some euro-zone nations are taking to cut their budgets will hinder economic growth.

Late Monday, the euro stabilized and settled up 0.28 percent at $1.2394 from a previous session close of $1.2360, after earlier falling to a four-year low of $1.2234.

European equities managed to close only slightly lower, with declines in mining shares cushioned by gains in defensive shares such as food producers and drug makers. The pan-European FTSEurofirst 300 index (.FTEU: ) closed down 0.12 percent at 1,013.06 points.

U.S. government bond prices fell as investors snapped up beaten-down shares.

German Chancellor Angela Merkel said on Sunday that the $1 trillion European Union-International Monetary Fund bailout plan agreed a week earlier has only bought the euro zone time to tackle its fundamental problem: a yawning gap between its strongest and weakest economies.

For most of the day, U.S. stocks (Read more about the stock market today. ) struggled due to disappointing economic data. A gauge of manufacturing in New York state showed a slower growth rate in May, raising concerns about the economic recovery. But fears of fallout from the euro-zone debt crisis weighed most heavily on investor sentiment.

Despite the late-day rally in U.S. equities, investors are still keeping close watch on any contagion stemming from the euro zone.

Alan Lancz, president at Alan B. Lancz & Associates Inc in Toledo, Ohio, said, “It’s a matter of executing and building in the austerity plans and putting them in place, so that you’re not just throwing a lot of money at a situation with a lot of debt and increasing the problem without changing the underlying root of the problem.”

Earnings outlooks also have been a concern. Lowe’s Cos (LOW.N: ) the No. 2 U.S. home improvement chain, gave a disappointing profit forecast for the rest of the year. The chief executive of Lowe’s, Robert Niblock, said on a call with analysts that some estimates of economic growth have started to come down.

Shares of Lowe’s fell 3.11 percent to $25.26.

“We have a recovery but it is a feeble one. If you load onto that recovery a severe dose of fiscal austerity, the prospects then for a sustainable recovery” are strained,” added Mike Lenhoff, chief strategist at wealth manager Brewin Dolphin.

MAJOR EQUITY MARKETS SEESAW

World stocks as measured by the MSCI All-Country index (.MIWD00000PUS: ) were down 0.69 percent. The more volatile emerging markets index (.MSCIEF: ) was down 2.09 percent.

In Japan the Nikkei (.N225: ) fell more than 225 points, or 2.17 percent, to a 10-week closing low, mirroring falls in the rest of the region as investors ignored encouraging economic data from the United States, Japan and Singapore.

Weakness in the euro and the pound helped the dollar index (Read more about the global trade. ) (.DXY: ), which was up 0.06 percent at 86.147 from a previous session close of 86.147.

U.S. Treasury debt prices fell.

The benchmark 10-year note was down 9/32 on Monday, its yield climbing to 3.49 percent. Two-year notes were down 1/32, with the yield at 0.81. The 30-year U.S. Treasury bond was down 12/32, with the yield at 4.36 percent.

Spot gold prices fell $10.90, or 0.88 percent, to $1,221.60.

The Reuters/Jefferies CRB Index (.CRB: ) was down 5.35 points, or 2.07 percent, at 253.20.

Penny Stocks

(Additional reporting by Leah Schnurr in New York and Blaise Robinson, Jeremy Gaunt and Neal Armstrong in London; Editing by Kenneth Barry)

U.S. stocks (Read more about the stock market today. ), euro recover on bargain-hunting