Stocks recovered some of last week’s losses in early trading Monday after encouraging signs about Europe’s debt crisis overshadowed weak data about spending by American consumers.
European markets had been down but saw some temporary gains early Monday after reports that French banks had agreed to accept slower repayment of Greece’s debt. That would give Greece more time to meet its other immediate financial obligations. French bondholders hold about $21.3 billion in Greek government debt. Greek lawmakers are debating austerity measures that must pass before the country can receive another financial rescue package to help avoid default.
The U.S. government, meanwhile, said that spending by consumers decreased in May, after adjusting for inflation. April’s figures were also revised downward, showing the first decline since January 2010. Consumers were faced with gas prices nearing $4 per gallon in late April and early May. Since then, gas prices have fallen to about $3.57 per gallon.
Consumer spending accounts for 70 per cent of economic activity Associated Press report.
In early trading, the Dow Jones industrial average rose 51 points, or 0.4 per cent, to 11,986. The Standard & Poor’s 500 index rose 4, or 0.3 percent, to 1,272. The Nasdaq composite index rose 11, or 0.4 per cent, to 2,664.
Nine of the 10 industry groups in the S&P showing gains. Only materials companies fell.
Broad markets have now fallen for seven of the past eight weeks as traders received a string of dismal economic data showing that the recovery is slowing. The Dow sank 1 per cent on Friday, and the S&P 1.2 per cent, erasing last week’s gains for both indices. The Nasdaq fell 1.3 per cent on Friday.
The S&P and the Dow both are down 7 per cent since they hit their highs for the year on April 29. However, the Dow is still up 3 per cent for the year, and the S&P is up 1 per cent.
Europe’s debt problems have weighed on global markets in recent weeks, with major indices reacting daily to the news about Greece’s progress toward a second bailout. If Greece defaults, the fear is, investors will lose faith in the financial strength of other nations that have borrowed heavily or hold billions in Greek debt. That could lead to the kind of credit crunch — when banks virtually stopped lending to one another — similar to what sparked the broader financial crisis after failure of investment bank Lehman Bros.
After the market closes, athletic apparel maker Nike Inc. will report on its financial performance in the fiscal fourth quarter.