Wall Street rebounded Monday as traders, still fairly certain that the Federal Reserve will lower interest rates at its meeting next week, appeared somewhat less pessimistic about the economy.
The stock market's movements were jumpy after Friday's dismal employment report, which showed the first monthly decline in jobs in four years. The data rekindled fears about housing and credit market weakness bleeding into the overall economy and squeezing consumer spending. But speeches from Fed officials Monday, though they avoided hinting at how the central bank might alter rates, seemed to give investors a bit more reason to be optimistic about the economy.
The Dow Jones industrial average rose 50.16, or 0.38 percent, to 13,163.54, after falling 250 points on Friday and switching directions several times throughout the session Monday.
Broader stock indexes also rose. The Standard & Poor's 500 index rose 2.92, or 0.20 percent, to 1,456.47, and the Nasdaq composite index rose 3.66, or 0.14 percent, to 2,569.36.
Bond prices jumped as stocks slipped, pushing the yield on the benchmark 10-year Treasury note down to 4.32 percent from 4.37 percent late Friday.
Dallas Fed President Richard Fisher said the economy appears to be "weathering the storm," and Atlanta Fed President Dennis Lockhart said investors should consider Friday's unemployment report in the context of a mostly strong batch of retail sales reports. San Francisco Fed President Janet Yellen said that while market turmoil has the potential to hurt the economy, rate policy should not be used to shield investors from losses.
For many investors, a rate cut after more than a year of the Fed standing pat on rates is practically a given. The debate, as they see it, is whether the Fed on Sept. 18 will reduce rates by a quarter percentage point or a half percentage point to loosen up the tight credit markets -- and also, if the central bank will continue to reduce rates as the year goes on.
There could be a major sell-off if the Fed doesn't reduce rates next week, said Scott Fullman, director of investment strategy for I. A. Englander & Co. And until then, movements will likely to be choppy, and exaggerated by low trading volumes. "It's very volatile here, but we're not seeing a tremendous amount of volume. People are on the sidelines. I think people want to be convinced of what's happening before they get back in."
Stocks also experienced a small relief rally after Gen. David Petraeus said to Congress that he recommended to President Bush that the drawdown of U.S. forces from Iraq start this month, said Alfred Goldman, chief market strategist at A.G. Edwards & Sons Inc.
Additionally, the Federal Reserve reported that consumer credit rose at an annual rate of 3.7 percent in July, down from a 5.9 percent growth rate for consumer debt in June.
The dollar slipped against most other major currencies, while gold prices, which have risen sharply in recent weeks amid concerns about the strength of the U.S. dollar, rose to fresh multiyear highs. A rate cut by the Fed could hurt dollar-denominated assets, prompting some investors to shift into gold.
The stock market's slide began Friday after the Labor Department reported the first monthly decline in payrolls in four years -- further depressing a market already uneasy about a lackluster housing market, tightening availability of credit and a rise in mortgage defaults.
While some investors had hoped for weak data to help the Fed justify cutting interest rates when it meets next week, the market was shocked by a loss in jobs when a gain had been expected. The drop in payrolls stirred concerns of a recession. With consumer spending accounting for about two-thirds of economic activity, Wall Street is concerned about any loss in employment that would make consumers hesitant to spend.
Because of Friday's retrenchment, the three major indexes all lost more than 1 percent for the week.
And on Monday, the market absorbed more news of fallout from mortgage failures. Countrywide Financial Corp. (CFC) said after the closing bell Friday it would cut as many as 12,000 jobs -- up to 20 percent of it work force -- as the mortgage lender tries to ride out upheaval in the mortgage industry. The company expects new mortgages to fall 25 percent next year.
Countrywide fell 97 cents, or 5.3 percent, to $17.24.
Energy company shares fell alongside oil prices. Light, sweet crude fell 67 cents to $76.03 a barrel on the New York Mercantile Exchange. Exxon Mobil Corp. (XOM) was down $1.49 at $84.26.
Some technology stocks were strong, though. Advanced Micro Devices Inc. (AMD) rose 34 cents, or 2.7 percent, to $12.95 after releasing its newest microprocessor, and Apple Inc. (AAPL) rose $4.36, or 3.3 percent, to $136.11 after selling its 1 millionth iPhone on Sunday.
The Russell 2000 index of smaller companies fell 3.51, or 0.45 percent, to 772.28.
Declining issues outnumbered advancers by about 5 to 3 on the New York Stock Exchange, where volume came to 1.17 billion shares.
Overseas, Japan's Nikkei stock average fell 2.22 percent. Britain's FTSE 100 fell 0.92 percent, Germany's DAX index fell 0.82 percent, and France's CAC-40 fell 0.80 percent.