Tech bounces as S&P 500 erases losses

 @ibtimes
on August 03 2011 6:40 PM

Stocks bounced from earlier losses on Wednesday, looking to break a seven-day run of declines as technology shares gained ground .

Earlier in the day, pessimism about the U.S. economic outlook took the S&P 500 to a new low for the year and led to predictions of an extended down leg in the market. The Nasdaq briefly turned negative for the year.

A lot of us are saying the market had reached a bit of an oversold area, said Rich Ilczyszyn, senior market strategist with MF Global in Chicago.

Technology shares led the bounce, with the S&P technology index <.GSPT> up 0.7 percent.

Traders also said buyers came into the market after comments from former Federal Reserve Vice Chairman Donald Kohn, who told the Wall Street Journal the Fed could consider a new round of stimulus to help the economy.

Driving the early losses was data showing the U.S. services sector fell in July to its lowest level since February 2010, while new U.S. factory orders fell in June, pulled down by weak demand for transportation equipment. For details, see [ID:nN1E77208M]

The news followed weaker-than-expected manufacturing data earlier this week, creating more angst about a pullback in the recovery.

If anything (the stock market move) is probably just a short cover, said David Lutz, managing director of trading at Stifel Nicolaus Capital Markets, Baltimore. He said many traders were possibly searching for bargains after days of losses.

The Dow Jones industrial average <.DJI> was down 25.47 points, or 0.21 percent, at 11,841.15. The Standard & Poor's 500 Index <.SPX> was up 0.57 point, or 0.05 percent, at 1,254.62. The Nasdaq Composite Index <.IXIC> was up 12.46 points, or 0.47 percent, at 2,681.70.

(Additional reporting by Ryan Vlastelica and Edward Krudy; Editing by Kenneth Barry)

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