Finally, some relief. But barely.
After a 673-point plunge in the Dow Jones industrial average over three days, investors went bargain-shopping Tuesday and all but stopped the decline in the stock market.
Investors got nervous after pushing stocks up more than 100 points early in the day and bailed out just before the close. End-of-the-day selling is a bad sign. It suggests a lack of confidence in the markets and came on a day when a huge decline in oil prices gave credence to concerns that the global economy is slowing.
The Dow closed down 0.04 percent at 16,315 and is down about 6 percent from its September high.
While that’s not a major downturn, the angst in the market lately is suggesting that the stock market may be on its way to a correction, a downturn of 10 to 20 percent. That’s stock market movement that produces anxiety because when stocks are falling, investors are never sure how far they will go.
Yet, if the downturn turns out to be a mere correction, it’s considered healthy in the long run because it simply wipes out some of the overenthusiasm investors have had for stocks this year.
Corrections tend to be short-lived, with stocks recovering from losses within about four months, according to Standard & Poor’s analyst Sam Stovall.
Analysts are not expecting a bear market — a downturn of more than 20 percent — because major losing periods typically happen during recessions. The U.S. economy is considered relatively healthy compared with the rest of the world, although potentially vulnerable if the global slowdown continues and worsens.
“While the locomotive role of the U.S. is less powerful than it was a couple of decades ago, it has regained its role as a major driver of global growth,” said IHS economist Nariman Behravesh.
Yet, investors aren’t particularly comfortable betting on stocks anywhere in the world.
Since September, they’ve cringed as Europe’s economy flirted with a return to recession, as the Ebola virus reached the U.S., as the Islamic State made gains in the Middle East, and as Russia’s intentions in Ukraine and Eastern Europe added to jitters.
The angst has shown up in dramatic daily moves up and down in the stock market since mid-September, and is especially evident in declining U.S. Treasury yields.
When yields are falling, it’s a sign investors want their money in safe bonds even though bonds aren’t paying much. Yields on 10-year Treasury bonds at the end of last year were about 3 percent, but Tuesday the yields dipped below 2.2 percent as investors worldwide sought a safe haven.
Standard & Poor’s investment policy committee recently reported that a move in yields below 2.3 percent “would confirm a larger bearish bias and target a move to 1.86 to 2.07 percent.”
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Investors also have been putting money in 10-year German bonds, yielding less than 0.9 percent, amid concerns about Europe’s economy.
Oil prices meanwhile are showing signs that investors are worried about slowing global growth. Brent crude has fallen more than 20 percent this year and dipped below $86 a barrel Tuesday. West Texas Intermediate dipped below $83 after the International Energy Agency reported Tuesday that demand for oil was likely to decline at a time when supplies are strong.
Still, a 6.6 percent downturn in the U.S. stock market, measured by the Standard & Poor’s 500, is nothing more than a “pullback,” Stovall said. Concerns are greater for other parts of the world, where the S&P’s index for emerging markets has dropped more than 9 percent, and S&P’s developed markets index — which includes Europe and Japan but not the U.S. — has dropped about 12 percent.
On Tuesday, the S&P 500 was able to eke out a three-point gain to 1877, as investors shopped for stocks that have already gone through sharp corrections. About a quarter of the large stocks that make up the S&P 500 have declined at least 20 percent. Airline stocks have been among them as investors have steered clear of stocks they assumed could be hurt by slowing global growth and fears that Ebola concerns would cause people to cut back on travel.
In a positive sign Tuesday, stocks such as American and United airlines climbed sharply as attention turned to the advantages that airlines and trucking companies and manufacturers could experience with the cost of oil down. The parent companies of American and United closed up 10.25 percent at $31.51 and 6.46 percent at $43.17, respectively.
Consumers are expected to buy more as gasoline takes less of their paychecks. S&P’s retail index climbed 1.2 percent.
Twitter @gailmarksjarvis