Stocks have pared most of their earlier losses over the course of afternoon trading on Tuesday, with the major averages well moving well off their lows for the session. The Dow and the S&P 500 have climbed back near the unchanged line, while the Nasdaq remains firmly negative.
The initial weakness came primarily as investors took profits following Monday's strong gains. However, investors had a refueled desire to buy at the close of Fed Chairman Bernanke's and Treasury Secretary Geithner's appearance before the House Financial Services Committee.
During his testimony, Geithner said the near-collapse of AIG (AIG) highlights broad failures of the U.S. financial system, and he pledged to work on improving the regulatory structure in order to prevent another similar situation.
I share the anger and frustration of the American people, not just about the compensation practices at AIG and in other parts of our financial system, but that our system permitted a scale of risk-taking that has caused grave damage to the fortunes of all Americans, Geithner said in prepared testimony.
Bernanke also said that the bonuses paid to employees of AIG (AIG) were highly inappropriate. At the same time, Bernanke outlined the reasoning behind the government's repeated interventions to prop up AIG despite severe mismanagement within the embattled insurance giant.
The Fed Chairman added that AIG must scrupulously avoid any excessive and unwarranted compensation.
We have pressed AIG to ensure that all compensation decisions are covered by robust corporate governance, including internal review, review by the Compensation Committee of the Board of Directors, and consultations with outside experts, Bernanke said.
In related news, the attack on AIG has driven other banks to work to return government funds as soon as possible. According to the Wall Street Journal, Goldman Sachs (GS) may sell its stake in the Industrial and Commercial Bank of China to help it repay $10 billion of what it received under the TARP.
In recent trading, the Dow has been bouncing back and forth across the unchanged line and is currently posting a modest loss, down 18.16 at 7,757.70. The Nasdaq is down 19.10 at 1,536.67 and the S&P 500 is down 3.48 at 819.44.
The recovery attempt by the Dow comes as several of the components of the blue chip index are posting noteworthy gains on the day. One of the biggest gainers within the average is General Electric (GE), which has risen 2.7 percent to reach its highest level in over a month.
Boeing (BA) is also posting a considerable gain on the day, with the aerospace giant currently posting a 2.3 percent. DuPont (DD) and Caterpillar (CAT) are also posting strong gains.
At the other end of the spectrum, a steep loss General Motors (GM) is limiting the upside for the Dow, with the auto giant currently down 4.5 percent. Citigroup (C), McDonald's (MCD) and Intel (INTC) are also posting considerable losses, falling more than 2 percent each.
Additionally, Disney (DIS) is also posting a notable loss, down 1.5 percent, after being downgraded to Neutral from Buy at Goldman Sachs.
Strength has emerged in a variety of sectors, contributing to the recovery attempt by the broader markets.
Computer hardware stocks are helping to lead the advance, with the Amex Computer Hardware Index currently up 2.1 percent on the day. With the advance, the index has risen to its highest level in nearly six months.
Railroad and steel stocks are also posting notable gains, with the Dow Jones Railroads Index up 2 percent and the Amex Steel Index up 1.3 percent.
Meanwhile, trucking and health insurance stocks are helping to keep the markets in the red. The Dow Jones Trucking Index is down 2.9 percent and the Morgan Stanley Healthcare Payor Index is down 3.1 percent.
Real estate, natural gas, utilities, and semiconductor stocks also continue to post notable losses after helping to lead the way lower earlier in the session.
In overseas trading, stock markets across the Asia-Pacific region posted substantial gains on Tuesday, benefiting from the rally seen on Wall Street overnight. Japan's benchmark Nikkei 225 Index extended a recent upward move with a 3.3 percent gain.
Meanwhile, the major European markets ultimately closed mixed. While the U.K.'s FTSE 100 Index ended the session down 1.1 percent, the French CAC 40 Index and the German DAX Index posted gains of 0.2 percent and 0.3 percent, respectively.
In the bond market, treasuries have moved well off their lows but are seeing continued weakness. Subsequently, the yield on the benchmark 10-year note is currently up 4.5 basis points at 2.705 percent after reaching a high of 2.748 percent.
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