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US markets are mixed even as completion of Greece's bailout deal nears; China's growth slows
NEW YORK (AP) ' Greece edged closer to fending off bankruptcy Monday, but U.S. markets were mostly underwhelmed.
Stocks struggled for direction after Greece announced it had persuaded its private investors to take deep losses on their bond holdings, which should help Greece avoid default in the short term but could also crimp the country's ability to borrow money in the future.
The Dow Jones industrial average stayed above its previous close for most of the day, and was up 45 points to 12,967 in the early afternoon. The Standard & Poor's 500 and the Nasdaq composite index, on the other hand, spent most of the day lower. Trading was even choppier in the early afternoon, with the S&P virtually unchanged at 1,371 and the Nasdaq down 4 points to 2,984.
"The market is going to continue to feel very schizophrenic," said Carol Pepper, CEO of founder of Pepper International, a money management firm in New York. "Some days it's depressed, some days it's excited, some days it's terrified."
Monday's news out of Europe appeared to only add to the fogginess of predictions on where the market is heading. Greece's new deal with its investors should help the country avoid bankruptcy later this month by lightening its crushing debt load. But the country remains in a serious recession even as the country moves toward making spending cuts being demanded by its lenders.
Jeff Sica, president and chief investment officer of SICA Wealth Management in Morristown, N.J., said Greece is only a distraction from other deep-rooted problems throughout Europe, including brewing debt burdens in Portugal and Italy. Presidential elections in France add another layer of uncertainty because a new leader could backpedal on fiscal commitments made by President Nicolas Sarkozy.
The struggling European countries also can't cut spending, which they'll likely need to do to avoid bankruptcy, without angering their citizens. On Sunday, hundreds of thousands of people in Spain took to the streets in dozens of cities to protest cuts in government spending.
Greece has "become a touchstone for people to say, 'Okay, things are getting better,'" Sica said. "But they had to force private investors to take losses, the European Central Bank has swelled their balance sheet, it's going to be impossible to impose austerity on these countries. They haven't really accomplished a single thing except buying time."
News about the U.S. economy has also been opaque, with every sign of economic recovery met with another sign of economic slowdown. While the unemployment rate falls, some analysts raise questions about the quality of the new jobs being created, and others worry that the high price of gas will prevent people from the spending needed to fuel the economy. The average price for a gallon of gasoline jumped nearly a nickel over the weekend, to $3.80. China, the superpower that has pushed the world economy forward even as other countries flagged since 2008, announced that its growth slowed at the end of last year.
The knee-jerk nature of the market has been on display in the past two weeks. The Dow powered higher on positive news headlines when it closed over 13,000 on Feb. 28, a milestone it hadn't reached since May 2008. But it's failed to close above that line again. On one day last week, it plummeted more than 200 points over concerns about Greece, more than double its second-biggest loss so far this year.
"Everybody is stepping back and assessing whether the ride is over," Sica said. "It's almost as if investors get to a point where they scratch their head and say, 'Does the market deserve to be here?'"
The 10 industry groups in the S&P 500 also failed to provide a clear direction, evenly split between gainers and losers in the afternoon. Utilities, which tend to attract nervous investors because of their relatively stability and generous dividends, rose the most. Markets in Europe were also divided. Germany did better than others, rising 0.3 percent. Greece fell 2.5 percent.
Companies making big moves included:
' Defibrillator maker Zoll Medical Corp. jumped 24 percent to $92.76 after its board agreed to a buyout offer of $93 per share from Japan's Asahi Kasei Corp.
' Mattress maker Sealy Corp. climbed 6 percent after its second-largest shareholder, an investment firm called H Partners Management, asked the company to shuffle its board and blamed the company's problems on the largest shareholder, private equity firm KKR & Co.
'Harley-Davidson Inc. climbed 2.5 percent after Citigroup analyst Greg Badishkanian raised his price target on the stock $4 to $50, saying he expects higher sales in the first quarter.
'Luxury retailer Michael Kors fell 4 percent to $47.75. The company, purveyor of $950 high heels, announced late Friday that some of its major shareholders would be selling their shares earlier than expected.