Stocks pare losses after construction spending, manufacturing reports boost hopes for rebound

Construction, manufacturing news helps stocks

NEW YORK — Stocks turned higher Tuesday after reports on construction spending and manufacturing signaled that the economy is continuing its recovery.

The Dow Jones industrial average rose about 75 points in afternoon trading following an early slide. It had fallen 122 on Friday.

The market’s rise came in choppy trading, a sign that anxious traders aren’t sure where to put their money. Defensive stocks including consumer products makers were among the gainers. Investors are still wondering whether cost-cutting in Europe to ease countries’ heavy debt loads will spoil a global rebound and hurt a U.S. recovery.

The market opened lower on the latest concerns about Europe’s economy and another drop in the euro, which touched a new four-year low. Traders then pounced on the latest U.S. economic numbers. The focus on economic news was a shift from recent weeks, when headlines about Europe’s debt woes and a sliding euro were major factors driving trading.

The Commerce Department said construction spending rose by the biggest amount in nearly a decade. The 2.7 percent April gain was the largest since August 2000. Economists forecast spending would be flat. However, homebuilders’ stocks fell although the report showed a big jump in residential building. That blip upward was expected to disappear now that a homebuyers’ tax credit has expired.

Meanwhile, the Institute for Supply Management said its manufacturing index fell to 59.7 in May from 60.4 in April. The figure was better than economists’ forecast of 59.

The welcome news didn’t lift all parts of the market. Energy stocks fell slid. Shares of BP dropped more than 11 percent after its latest attempt to stop the oil spill in the Gulf of Mexico failed. The price of oil also fell, hurting other energy stocks.

The volatile trading comes after the Dow had its worst May since 1940, losing nearly 8 percent. All 30 stocks in the index fell during the month. The Dow has dropped in nine of the past 12 trading days.

The euro slid as low as $1.2112, its lowest level since April 2006, before climbing back to $1.2298. The euro’s moves against other currencies have come to reflect traders’ confidence in Europe’s ability to manage a sovereign debt crisis that started in Greece but has started to affect other European nations like Portugal and Spain.

A slew of reports this week on jobs, housing and manufacturing could start to signal whether weakness in Europe is spreading. The biggest report comes Friday when the government releases its May employment numbers.

“As long as they continue to go on the positive side, I think it will overshadow what’s going on in Europe,” said Charles Massimo, president of CJM Fiscal Management in Melville, N.Y.

In early afternoon trading, the Dow rose 74.59, or 0.7 percent, to 10,211.22. The Standard & Poor’s 500 index rose 2.16, or 0.2 percent, to 1,091.57, while the Nasdaq composite index rose 9.49, or 0.4 percent, to 2,266.53.

Three stocks fell for every two that rose on the New York Stock Exchange, where volume came to 642 million shares, compared with 644 million traded at the same point Friday. Volume has been light because some traders are away for a long Memorial Day holiday. Light volume can intensify swings in the market.

Bond prices fell, pushing interest rates higher. The yield on the benchmark 10-year Treasury note rose to 3.30 percent from 3.29 percent late Friday.

The dollar fell against most other major currencies, while gold rose.

Crude oil fell 12 cents to $73.85 per barrel on the New York Mercantile Exchange.

BP’s U.S.-listed shares dropped $5.05, or 11.8 percent, to $37.90. The company said its costs tied to the spill are nearing $1 billion. Offshore drilling contractor Transocean Ltd., which owns the well, fell $4.25, or 7.5 percent, to $52.52.

Among consumer stocks, Procter & Gamble Co. rose 50 cents to $61.59 and Kraft Foods Inc. rose 47 cents to $29.07.

Insurer American International Group Inc. rejected a lower offer from Britain’s Prudential for one of its Asian insurance units. Prudential proposed cutting the initial $35.5 billion offer by about $5 billion. AIG shares dropped 41 cents to $34.97.

Hewlett-Packard Co. rose 46 cents to $46.47 after it said it would cut about 9,000 jobs and record $1 billion in charges in the next several years as it creates fully automated commercial data centers. The technology company expects the moves to save it as much as $700 million annually.

High unemployment remains a major obstacle for a strong, sustained domestic recovery. Economists expect the Labor Department’s May jobs report to show that the unemployment rate dipped to 9.8 percent and that employers added 503,000 jobs.

Homebuilder KB Home fell 32 cents, or 2.2 percent, to $14.16, while Toll Brothers Inc. fell 52 cents, or 2.5 percent, to $20.55.

The Russell 2000 index of smaller companies fell 4.47, or 0.7 percent, to 657.14.

Overseas, Britain’s FTSE 100 fell 0.5 percent, Germany’s DAX index rose 0.3 percent, and France’s CAC-40 slipped 0.1 percent.

Asian markets fell following a report that China’s manufacturing industry slowed last month. China has had one of the world’s strongest economies in recent years, so any slowdown there could stoke fears that a global rebound is slowing.

Hong Kong’s Hang Seng fell 1.4 percent, while Japan’s Nikkei stock average lost 0.6 percent.