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NEW YORK (AP) — Bargain hunters helped push the Dow back above
11,000 briefly Tuesday.
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The Dow Jones industrial average rose 193 points, or 1.8 percent,
to 11,003 in morning trading. On Monday, the Dow had its worst day
since 2008. It plunged 634.76 points as fear coursed through global
markets.
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Investors worried about the first-ever downgrade to the U.S. credit
rating, the slowing U.S. economy, debt problems in Europe and
rising inflation in less-developed countries.
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Hope that the Federal Reserve may announce more help for the
economy in the afternoon also lifted stocks.
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“Prior to the recent turmoil, we had thought the Fed would stand
pat” at its policy meeting on Tuesday, said Paul Dales, senior U.S.
economist with Capital Economics. “But now some action seems
likely.”
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The central bank already has kept its key interest rate close to
zero since 2008. The Fed in June ended a $600 billion program to
buy Treasurys as a way to support the economy. Some Fed officials
oppose another round of so-called quantitative easing because it
could lead to higher inflation.
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When the central bank issues its statement this afternoon, many
economists don’t expect to see another round of Treasury purchases.
But Dales said the Fed could pledge to hold onto the Treasurys and
other assets it has already bought for “an extended period.” Such a
move could soothe investors temporarily because it means the Fed
won’t flood the market with assets to sell. But such a move likely
wouldn’t be a significant boost to the economy.
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The S&P 500 index rose 24, or 2.2 percent, to 1,144. The
Nasdsaq composite index rose 59, or 2.5 percent, to
2,416.
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“I think that stocks were cheap heading into the decline, and they
just became cheaper,” said Brian Jacobsen, chief portfolio
strategist for Wells Fargo Funds Management, which has $228 billion
in assets under management. “As a long-term investor, that’s what I
like to see.”
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While stocks were plummeting Monday afternoon, Jacobsen said he was
buying technology stocks, particularly those with healthy balance
sheets.
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Gold set another record early Tuesday. It rose $21.50 per ounce to
$1,737.70. Gold started the year at $1,421.40.
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Investors piled into Treasurys on Monday, sending the yield on the
10-year note down to 2.34 percent. That matched its lowest level
for the year, reached last week. Treasurys gave back some of those
gains early Tuesday, “as they shake off some of the froth,” RBS
Securities analysts wrote in a report. The 10-year yield rose to
2.38 percent.
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Economists believe there is a greater chance of a recession because
the economy grew much more slowly in the first half of 2011 than
previously thought. The U.S. economy grew at its slowest pace in
the first half of 2011 since the recession ended in June
2009.
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The manufacturing and services industries barely grew in July. The
unemployment rate remains above 9 percent, despite 154,000 jobs
added in the private sector in July.
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Economies across the globe are also struggling.
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Worries are growing that Spain or Italy could become the next
European country to be unable to repay its debt. The European
Central Bank bought billions of euros of Italian and Spanish bonds
Monday in hopes of lowering borrowing costs for the
countries.
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Another concern: high inflation in less-developed countries, which
have been the world’s main economic engine through the recovery.
China’s inflation rose to a 37-month high in July. Hong Kong’s Hang
Seng index fell 5.7 percent on Tuesday.
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The worries about the global economy falling into a second
recession have pulled attention away from stronger corporate
earnings.
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Dish Network Corp.’s second-quarter net income rose 30 percent to
$334.8 million on stronger revenue. Internet company AOL Inc.
reported a smaller net loss for its second quarter, helped in part
by stronger advertising revenue.
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The housing market, though, remains weak. Homebuilder Beazer Homes
USA Inc. said its loss widened last quarter after it closed on
fewer homes.
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Among the 441 companies in the S&P 500 index that have already
reported their second-quarter earnings, profits are up 12 percent
from a year ago.
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