Wall Street showed some signs of stability Tuesday as investors, heartened by government plans to aid consumer lending companies, selectively bought stocks after a huge two-day rally. Tech stocks lagged the market amid concerns that businesses will continue slashing their capital spending in a recession.
Both the Dow Jones industrial average and Standard & Poor's 500 index rallied for a third straight session, the first time the Dow has accomplished that feat since late August, and the first time the S&P 500 has done it since mid-September. Stocks fluctuated during most of the day, with some profit taking expected considering the sizable gains.
Investors were encouraged after the Treasury Department and the Federal Reserve said they planned to provide $800 billion to help unfreeze the market for consumer debt and to make mortgage loans cheaper and more available. The program is aimed at reviving moribund credit markets.
The government, while looking to reduce fear in the credit markets, is eager to see lenders including credit card companies, student loan issuers and car purchase financers resume more normal levels of lending to help stimulate the economy. Since September, when credit markets first froze, financial institutions have been hesitant to hand over money for fear they won't be repaid. That, in turn, has made it harder for businesses and consumers to borrow.
"We're getting more clarity about the federal assistance across the board, and I think that's being well received," said Arthur Hogan, chief market analyst at Jefferies & Co. "Most of the overhangs in the market are getting answers."
The government's latest effort to combat the fear hobbling the marketplace overshadowed a report that the nation's overall economic output shrank in the July-September quarter faster than initially estimated as consumers slashed spending by the most in 28 years.
The Commerce Department said third-quarter gross domestic product declined at a 0.5 percent annual rate, outpacing the 0.3 percent first estimated a month ago. Still, Wall Street had expected the number would worsen, so the report didn't catch the market by surprise. It was the worst reading since growth fell at a 1.4 percent pace in the third quarter of 2001, which was during the last recession.
And, ahead of the holiday shopping season, investors got some good news about consumers. The Conference Board said its Consumer Confidence Index unexpectedly rose to 44.9 in November, up from a revised 38.8 in the previous month. Last month's reading was the lowest since the research group started tracking the index in 1967. Economists expected the index to slip to 37.9.
The business research group said Americans' views on the economy still remain the gloomiest in decades. Consumer spending, always a concern on the Street, has taken on greater importance because the economy cannot expand unless consumers are spending — and they've shown increasing reluctance the past few months, a troubling sign with the holiday season approaching.
According to preliminary calculations, the Dow Jones industrial average rose 36.08, or 0.43 percent, to 8,479.47. The index was up 164 points earlier in the session but also fell 161.
Broader indexes were mixed. The Standard & Poor's 500 index rose 5.60, or 0.66 percent, to 857.41. The Nasdaq composite index, hurt by signs that companies are cutting back on technology spending, fell 7.29, or 0.50 percent, to 1,464.73.
Still, advancing issues were ahead of decliners on the Nasdaq by 5 to 4. On the New York Stock Exchange, advancers were ahead by more than 2 to 1.