Stocks fall as Buffett deal brings modest comfort
Sara Lepro And Tim ParadisInvestors worried about the economic recovery drew only modest comfort from billionaire investor Warren Buffett's decision to buy one of the nation's largest railroads.
Stocks were off their earlier lows by early afternoon, though, as energy and industrial stocks spiked, driven higher by rising commodity prices.
Buffett's Berkshire Hathaway announced Tuesday it is paying $100 a share for Burlington Northern Santa Fe in a deal valuing the railroad at $34 billion, lending some support to the market.
But investors are still on edge about unemployment and the stability of major financial firms in Europe.
Health care products maker Johnson & Johnson said it would cut up to 7 percent of its global work force and streamline its business structure to save up to $900 million next year.
In Europe, investors were unnerved by further efforts to restructure two of the U.K.'s largest banks. Lloyds said it was looking to raise about $34 billion through a share issuance, while the Royal Bank of Scotland got a $41 billion infusion from the government.
A rise in factory orders wasn't enough to boost sentiment. The Commerce Department said orders to U.S. factories rebounded in September after dropping in August. Orders rose 0.9 percent in September amid increases in orders for autos, heavy machinery and military aircraft rose. Analysts had expected an increase of 0.8 percent, according to Thomson Reuters.
Investors around the globe have been uneasy in recent weeks, wary about whether the economic recovery can maintain the same pace once government stimulus measures are removed. That uncertainty has led to wild swings in the market. The Dow Jones industrial average has risen or fallen more than 100 points in six of the last eight trading days, the most volatility since March.
Thomas Ruggie, president of Ruggie Wealth Management in Tavares, Fla., said investors are worried that the stock market has been getting overheated so they're not moving into stocks even when there is upbeat news like merger activity.
"People are still scared," he said. "People are treading very, very lightly."
In early afternoon trading, the Dow fell 34.54, or 0.4 percent, to 9,754.90, after being down as much as 86 points earlier in the session. The Dow rose 77 points Monday. The broader Standard & Poor's 500 index fell 1.65, or 0.2 percent, to 1,041.23. The Nasdaq composite index fell 4.20, or 0.2 percent, to 2,045.00.
Analysts expect trading to be choppy throughout the week, as the market readies for a frenzy of series of economic reports that culminates Friday with the government's employment report for October.
Stocks vacillated between gains and losses Monday after a stronger-than-expected reading on manufacturing activity and a surprise profit from Ford Motor Co. All the major indexes ended up with gains of less than 1 percent.
"We're seeing a natural ebb and flow of risk appetite," said Kevin Gardiner, head of investment strategy for Europe, Middle East and Africa at Barclays Wealth.
Investors are watching the Federal Reserve, which on Tuesday began a two-day policy meeting on interest rates. Though the central bank isn't expected to take any action on interest rates, investors will be watching for what the Fed has to say about the state of the economy when it issues a statement Wednesday at the conclusion of the meeting. The Fed's benchmark interest rate currently stands at a record low of essentially zero.
Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.48 percent from 3.42 percent late Monday.
The dollar rose against other major currencies.
Crude oil rose $1.31 to $79.44 a barrel on the New York Mercantile Exchange, while gold surged to a new high of $1,082.20 an ounce.
Shares of Burlington Northern jumped $21.51, or 28.3 percent, to $97.58 after Buffett's move.
Johnson & Johnson fell 37 cents to $59.12.
Royal Bank of Scotland fell 71 cents, or 5.6 percent, to $11.94, while Lloyds Banking Group PLC rose 24 cents, or 4.4 percent, to $5.68.
Stanley Works and Black & Decker Corp. rose as investors applauded a marriage of the tool makers. Stanley Works on Monday agreed to acquire its rival in an all-stock deal worth $3.46 billion. Black & Decker jumped $10.98, or 23.2 percent, to $58.32, while Stanley Works rose $1.95, or 4.3 percent, to $47.10.
The Russell 2000 index of smaller companies rose 1.42, or 0.2 percent, to 563.82.
Four stocks fell for every three that rose on the New York Stock Exchange, where volume came to 677.1 million shares compared with 736.1 million traded at the same point Monday.
Overseas, Britain's FTSE 100 fell 1.2 percent, Germany's DAX index fell 1.3 percent, and France's CAC-40 dropped 1.4 percent. Markets in Japan were closed for a holiday.