Trader David O'Day works on the floor of the New York Stock Exchange before the closing bell, Friday Oct. 3, 2008. Stocks ended a volatile week with another sell-off Friday while credit markets remained strained after enthusiasm over the government's $700 billion financial rescue plan gave way to worries about obstacles still facing the economy. (AP Photo/Richard Drew)
NEW YORK (AP) -- Wall Street headed toward a higher open Tuesday, following a now-familiar pattern of snapping back after a huge selloff. Investors, while looking for bargains, are focusing on the health of retailers and automakers.
The stock market suffered one of its worst days since the start of the financial crisis on Monday as investors responded to a string of bad economic news by fleeing to the sidelines. Among the day's events: confirmation that the U.S. has been in a recession since December 2007. While the news did not come as a surprise, it underscored the growing concerns about the impact of a severe and prolonged downturn.
Some bargain hunting is to be expected Tuesday after the slide that took the Dow Jones industrials down 679.95 points on Monday, but investors will also be watching for any clues about the economy.
The market, worried about consumer spending that is crucial for an economic recovery, was again focusing on retailers, some of whom were reporting third-quarter earnings. Sears Holdings Corp., battered by hefty charges and weak results at its U.S. department stores and Kmart locations, reported that it swung to a loss in the quarter. The company has previously said it will close eight more underperforming stores this year.
Office supply chain Staples Inc., meanwhile, said its third-quarter profit dropped 43 percent because of hefty charges from restructuring and an acquisition. Excluding the charges, results topped Wall Street estimates. Revenue rose 35 percent, even though North American retail sales suffered.
Monday's stock selling began on concerns about retail sales; investors were disappointed by reports of only modest sales gains during the Thanksgiving weekend. The crucial holiday shopping season looks to be one of the weakest in decades, a troubling sign for stores and the overall economy.
But Wall Street is hopeful for some sort of resolution for the nation's top three automakers, who are scheduled to submit to Congress Tuesday their plans for remaking themselves with government money. General Motors Corp., Ford Motor Co. and Chrysler LLC are seeking $25 billion in government support.
Major carmakers are also expected to report U.S. sales figures for the month of November Tuesday, with analysts expecting grim results as the recession curtails demand.
Dow Jones industrial average futures rose 120, or 1.47 percent, to 8,259 about 45 minutes before the market opening. Standard & Poor's 500 index futures rose 14.20, or 1.74 percent, to 830.00, while Nasdaq 100 index futures gained 14.50, or 1.32 percent, to 1,109.00.
Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.77 percent from 2.76 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.11 percent from 0.03 percent late Monday.
The market's steep drop on Monday ended a five-day rally - the first such winning streak for the Dow and the S&P 500 since July 2007. But it also fits a pattern that has become the norm on Wall Street, with the market making a big advance, only to quickly falter on the first sign of more bad news. And there was plenty of bleak news to be had on Monday.
In addition to mixed readings on retail sales and confirmation of a recession, investors grappled with a report showing manufacturing activity fell to a 26-year low in November. At the same time, the Commerce Department said construction spending fell by a larger-than-expected amount in October.
As further evidence that the housing sector remains under pressure, homebuilder Beazer Homes USA Inc. said Tuesday its fiscal fourth-quarter losses more than tripled as revenue plunged. The company said demand for new homes continues to be hurt by low consumer confidence, falling prices, extensive supply and less access to financing.
Financial stocks, which have been pummeled over concerns that losses tied to bad mortgage debt will continue to grow, are expected to remain in focus Tuesday.
Treasury Secretary Henry Paulson said Monday the Bush administration is looking for more ways to tap the $700 billion financial rescue program and will consult with Congress and the incoming Obama administration.
Also Monday, Federal Reserve Chairman Ben Bernanke said he is prepared to lower interest rates once again. Many economists expect Bernanke and his colleagues to drop the Fed's key interest rate - which now stands at 1 percent - at their next meeting on Dec. 15-16.
The dollar fell against other major currencies. Gold prices rose.
Light, sweet crude rose 46 cents to $49.74 a barrel in premarket electronic trading on the New York Mercantile Exchange.
Overseas, Japan's Nikkei stock average fell 6.35 percent. In afternoon trading, Britain's FTSE 100 was up 0.81 percent, Germany's DAX index was up 1.79 percent, and France's CAC-40 was up 1.06 percent.
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