[BRIEFING.COM] After trading relatively unchanged all morning, and then languishing in negative territory throughout much of the afternoon as renewed credit concerns fostered a more risk-averse mindset among investors, stocks rallied back late in the day but only enough to close the major averages mixed.
As evidenced by the worst performing sector since late July turning in the day’s best performance, it was apparent that selective bargain hunting became the mantra going into the close. Materials, which had lost about 14% since peaking on July 19, spiked 2.0% in an hour suggesting that those pricing in further downside for commodities were forced to cover. The sector closed up 1.3%.
Of the other three sectors closing higher, Industrials ranked second as a decline in oil prices helped foster buying interest throughout the transportation space. Excluding Friday’s 2.6% advance, Industrials had lost nearly 10% over the last month.
The Energy sector’s resilience in the face of crude’s 1.1% drop was also noteworthy. Energy, which was off more than 9% from its late-July high, was down as much as 1.7% earlier but eked out a modest 0.4% advance.
Consumer Discretionary was the day’s only other bright spot. The underperforming sector got its biggest lift after Lowe’s (LOW 28.50 +1.63) topped Wall Street expectations despite persisting weakness in the housing market.
The day’s biggest disappointment was Financials. Even though the beaten-down sector closed well off its lows, it still lost 0.8%, removing significant leadership and preventing the S&P 500 from holding onto late-day gains.
The lack of follow-through momentum in the sector, which soared 3.6% on Friday and was the main driver behind the S&P 500 logging its biggest percentage move (+2.5%) in over four years, was attributed to concerns as to whether the Fed’s recent actions will be enough to preempt a credit crunch. The heavily weighted sector opened higher but quickly reversed course after the Fed said it added another $3.5 bln in reserves via overnight repos.
An aversion by money market funds to asset-backed commercial paper sparked a flight-to-quality bid in the 3-month Treasury bill that pushed its yield down more than 100 basis points intraday to 2005 lows below 2.50%. That was the biggest one-day move in more than 20 years.
Separately, fed funds futures began to price in, not just the likelihood of a Fed easing next month, but as much as a 50 basis point cut at the September 18 FOMC meeting.
NYSE Adv/Dec 2001/1327...Nasdaq Adv/Dec 1559/1485
Stocks continued a volatile trading day today as lingering fears over fallout from the troubled U.S. sub-prime mortgage market continued to weigh on investor sentiment. After opening at 13,078.51 points and then dropping below the 13,000 mark, the Dow Jones Industrial Average bounced back in late trading to above 13,100, but on lower volume than the previous trading day in what looked like a cover spike.

But woes persisted as flight to quality continued and the yield on the 3-month U.S. Treasury bill dropped below 2.5% -a 20 year low (U.S. Treasury bills are considered risk-free, as investors bid up the price the yield on the T-bill drops).