European markets opened higher Tuesday, putting at least a temporary hold on the latest global selling spree.
Europe’s major exchanges were all higher in early trading. London’s FTSE and the CAC in Paris each gained 1.1 percent. In Frankfurt, the Dax picked up 0.8 percent. In Asia, markets were mixed, but mostly lower. Tokyo’s Nikkei average closed down 0.7 percent and the All Ordinaries index in Australia shed 1 percent. In Seoul, the KOSPI gained 0.7 percent, while Hong Kong’s Hang Seng plunged 2.3 percent. Stocks tumbled Monday on Wall Street, with the Dow and Standard and Poor’s 500 falling to 12-year lows after insurance company American International Group’s huge quarterly loss added to worries about the financial sector and the economy. The Dow Jones industrial average lost almost 300 points, or 4.2 percent, to end at 6,763, its lowest point since April 25, 1997. The S&P 500 index lost 34 points, or 4.7 percent, ending at 701, its lowest close since Oct. 28, 1996. The Nasdaq composite lost 55 points, or 4 percent, to end at 1,323. The tech-fueled Nasdaq has held up better than the other major averages this year and remains above its close of 1,316 from Nov. 20, 2008. The stock losses Monday were in response to AIG posting a $62 billion fourth-quarter loss, but also a continuation of the worries about the financial sector and the economy, said Bill Stone, chief investment strategist at PNC Financial Services. “There are reverberations from AIG and also the continued uncertainty around the financial sector as a whole, which is the chorus that never ends,” he said. “That’s paired with the second chorus that never ends — the weakness of the global economy,” he said. “It’s reflected in the weakness in the industrial, material and energy stocks today.” For the full year, AIG lost $99 billion after reporting a profit of $9.3 billion in 2007. To keep the company from collapsing and infecting the broader financial market, the government is revising its bailout for the third time and committing an additional $30 billion in exchange for cumulative preferred stock. The rescue plan now totals $162.5 billion. Investors also remain wary about the various government initiatives to try to stem the recession, announced over the past few weeks, said Mark Travis, president and CEO at Intrepid Capital Funds. They include the newest bank bailout plan, the $787 billion economic stimulus plan and the $75 billion mortgage modification plan. “The administration is hemming and hawing and still not being clear about exactly what they are going to do and how it’s going to work,” he said. Travis said some of the policies are “well meaning but aren’t going to provide the elixir that they hope.” With all the uncertainty, investors are on a “capital strike.” Tuesday brings an economic report on the housing industry and a number of congressional hearings. February sales from the nation’s automakers are also due throughout the session. The National Association of Realtors releases its pending home sales index for January on Tuesday morning. The index is expected to have fallen 3 percent after rising 6.3 percent in the previous month. Federal Reserve Chairman Ben Bernanke is to testify before the Senate Budget Committee on economic and budget challenges, starting at 10 a.m. ET.
Also at 10 a.m., Peter Orszag, director of the White House Office of Management and Budget, testifies before the House Budget Committee about the fiscal 2010 budget. Stocks tumbled Friday after the government said it will control as much as 36 percent of Citigroup’s common stock. Also in play: a report showing the economy shrank at its sharpest pace in 26 years in the fourth quarter of 2008.
