NEW YORK – Stocks wavered Tuesday as investors worried that Slovakia might block an expansion of Europe's financial rescue program.
Sixteen countries that use the euro have approved a bill to strengthen a European rescue fund, but Slovakia hasn't signed off on it yet. The measure would increase the size and powers of Europe's financial rescue fund, freeing large amounts of money for banks and struggling governments. The funds could help avert a full-blown crisis, but the vote requires the unanimous support of countries that use the euro. If Slovakia doesn't approve the measure, it could complicate efforts to address Europe's debt jam. A vote is expected later in the day.
"I think markets want to say 'who cares about Slovakia,' but the reality is every little country has to agree," said Randy Warren, investment strategist at Exton, Pa.-based firm Warren Financial Service.
If Greece defaults on its debt, it would hurt European and U.S. banks by decimating the value of Greek government bonds they own. Those banks would then be less likely to lend to each other and to businesses. That could plug up an already weak global economy, with implications for everything from bank stocks to international trade.
Major U.S. stock indexes bounced between small gains and losses throughout the day.
The Dow Jones industrial average was down 25 points, or 0.2 percent, to 11,407 as of 2:30 p.m. Eastern. The Standard & Poor's 500 index slipped less than one point, or 0.1 percent to 1,194. The Nasdaq rose 10, or 0.4 percent, to 2,577.
The relatively tepid trading came a day after the Dow jumped 330 points, its largest increase since Aug. 11. Markets have been swinging wildly since early August, when Europe's economy suddenly seemed closer to the brink of collapse.
Moves of more than 100 points for the Dow have become commonplace as traders react swiftly to every whiff of news coming out of Europe. The S&P 500 is up 8.8 percent since last Tuesday, when it traded 20 percent below its April peak. Had the S&P closed at that level, it would have put the index into what analysts call a bear market. The index is still down 5.1 percent for the year.
Many market watchers think the volatility will continue until heavily indebted countries like Greece, Spain and Italy have established a clear path out of their current debt mess. Some hope that the summer's heavy selling may have reflected the worst of the market's fears.
"It appears that barring an uncontrolled meltdown, the bottom is in," said Warren.
In corporate news, Dollar Thrifty Automotive Group Inc. fell 1.7 percent after the car-rental company said it was taking itself off the market after failing to get acceptable takeover proposals from Hertz or other companies.
Discount retailer 99 Cents Only Stores Inc. rose 4.4 percent. Ares Management LLC and the Canada Pension Plan Investment Board have offered to buy the company for $22 per share in cash, a 7 percent premium from Monday's closing price.
After the closing bell, aluminum maker Alcoa Inc. will become the first company in the Dow Jones industrial average to report third-quarter results. Alcoa rose 2.8 percent ahead of the report.
The release of Alcoa's results is considered the unofficial start of the corporate earnings reporting season. Many analysts hope that the upcoming wave of reports will pull investor focus away from Europe and back to the health of U.S. corporations.
Analysts expect earnings from S&P 500 companies to rise about 12 percent from the same period last year, according to data provider FactSet. Revenue is expected to rise 11 percent. Investors are concerned not only with companies' performance over the last quarter but what they expect to earn over the next year. A series of gloomy forecasts could compound fears that the country could enter another recession.