- The Washington Times - Wednesday, March 25, 2009

NEW YORK | A stock drop is never reassuring - except when it could have been worse.

The Dow Jones Industrial Average shed nearly 116 points, or 1.5 percent Tuesday. But it also held on to 382 of the 498 points it racked up a day earlier.

Anyone with a 401(k) would have liked to see the rally continue. Market analysts said, though, that a pullback was expected given the massive gains Wall Street logged the previous day when the government released plans to remove bad loans from banks’ books.

“We’ll take that trading pattern any time,” said Arthur Hogan, chief market analyst at Jefferies & Co. He said he came into work anticipating the Dow to drop as much as 2 percent Tuesday after the index jumped 6.8 percent Monday - its biggest gain since late October.

The Dow was up more than 1,200 points after hitting nearly 12-year lows on March 9, and there was little in a way of positive economic or corporate data Tuesday to lift stocks further.

If Wall Street gets more good news, stocks could resume their rise. But if it doesn’t, the rest of Monday’s rally, and then some, could be wiped out. Investors have been cautious, recalling the 20 percent rise between late November and January that fizzled, with stocks then tumbling to new lows on fears about the economy and banking system.

Later this week, some big economic reports are scheduled to come out: durable goods for February, a revised fourth-quarter gross domestic product number, and personal income and spending for February. And next month, first-quarter earnings reports start pouring in.

A government report Tuesday said U.S. home prices fell 6.3 percent in January from the same month last year.

The Dow fell 115.89, or 1.5 percent, to 7,659.97. The index fell in early trading, rose briefly in afternoon trading, and then turned lower again.

Broader stock indicators also tumbled. The Standard & Poor’s 500 Index fell 16.57, or 2 percent, to 806.25, and the Nasdaq Composite Index fell 39.25 points, or 2.5 percent, to 1,516.52. The Russell 2000 Index of smaller companies fell 16.94, or 3.9 percent, to 416.78.

Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.71 percent from 2.68 percent.

Before the market’s retrenchment Tuesday, stocks had spiked about 20 percent over the course of 10 days in response to actions in Washington and nascent signs of economic renewal.

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