Wall Street erased earlier losses and ended little changed on Monday as investors shrugged off a surprise weekend interest rate hike from China's central bank. In a quiet day for equities with no major economic data or corporate news, trading volume, which usually dips during the holiday season, was even lighter as a blizzard moved across the north-eastern United States.
AIG at 52-week high as new credit facilities arranged Financial stocks rose, in part boosted by a rally in American International Group shares, and helped the S&P 500 cut losses and turn positive in afternoon trade. "The market is pretty much flat but we ended well off our lows and although we have no buyers stepping in, we have to give the bulls the victory seeing how the market turned around," said Ryan Detrick, technical analyst at Schaeffer's Investment Research at Cincinnati, Ohio.
"Today is an exception but this week is typically considered the Santa Claus rally time and we expect that to resume later this week and end the year higher." The Dow Jones industrial average settled down 20.73 points, or 0.18 percent, at 11,552.76. The Standard & Poor's 500 Index was up 0.74 points, or 0.06 percent, at 1,257.51. The Nasdaq Composite Index was up 4.25 points, or 0.16 percent, at 2,669.85.
Shares of AIG rose as much as nearly 12 percent as investors applauded the insurer's move to secure $4.3 billion in credit facilities. The stock ended up 9.3 percent at $59.38. The S&P financial sector index gained nearly 1 percent. But retail stocks were hit as the snowstorm on the heavily populated US East Coast kept many shoppers away from malls just after Christmas, casting a pall on the final act of the holiday season. The weekend's blizzard conditions, which shut down airports and halted traffic, may also signal an end to shoppers' appetite in the next few months.
The S&P 500 retail index fell 0.3 percent, underperforming the wider market. Among retailers, Nordstrom Inc shares fell 1.6 percent to $42.09 and RadioShack was down 0.1 percent at $18.47. The CBOE Volatility Index jumped 7.3 percent to 17.67, only one session after closing at its lowest levels since July 2007. The VIX "is beginning to price in the possibility of more volatile trading in early 2011," said Fred Ruffy, options strategist at WhatsTrading.com.
The VIX measures projected stock market volatility off of near-term S&P 500 index option prices and often moves inversely to the benchmark S&P. China's central bank raised interest rates on Saturday for the second time in just over two months as it stepped up its battle to rein in stubbornly high inflation. The People's Bank of China said it will raise the benchmark lending rate by 25 basis points to 5.81 percent and lift the benchmark deposit rate by 25 basis points to 2.75 percent.
About 2 billion shares traded on the New York Stock Exchange, compared to the daily average of about 4.8 billion shares this year. Trading in the options market was also thin, with 3.7 million calls and 2.6 million puts traded, or about half the daily average. Advancing stocks slightly outnumbered advancing ones on the NYSE by 1,582 to 1,312, while on the Nasdaq, advancers beat decliners 1,483 to 1,114.