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Despite strong intraday gains, the stocks closed lower as nervous inventors opted to sell into the rally rather than make a longer-term bet on market strength. This sell-off pushed the Nasdaq Composite to its weakest finish since early November. The Dow has lost more than 500 points, or about 4.7% since May 10, when it came about 80 points within reach of its all-time high. The Nasdaq has lost about 9% since hitting its highest level in more than five years last month. The market is vacillating between fears of inflation and economic slowdown.

Today, the Dow Jones industrial average closed down 26.98 or 0.2% to 11,098.35, the broader Standard & Poor’s 500 index closed down 5.49 or 0.4% to 1,256.58, and the Nasdaq composite index closed down 14.10 or 0.7% to 2,158.76.

Market breadth was negative. On the New York Stock Exchange, decliners topped advancers by a margin of 17 to 15 on volume of 1.90 billion shares. On the Nasdaq, losers also beat winners by a margin of 17 to 13 as 2.17 billion shares changed hands.

Investors evidently remain nervous and want clarity as to whether recent market weakness was a long- or short-term correction. The markets remain in a very nervous arena and people would rather sell into a rally. Recent sell-offs have been sparked by disappointment that the Fed might not be able to stop raising rates. Federal Reserve Chairman Ben Bernanke said his comments to a CNBC TV anchor that briefly roiled financial markets earlier this month were a “lapse of judgment” on his part that won’t happen again. He said that he regretted the incident and in the future his comments to the financial markets would come through regular channels.

Shares of Toll Brothers Inc. rose 1.7% up $0.45 to $27.35, after the homebuilder reported better than expected earnings. However, the company lowered its earnings guidance in the latest sign of a slowing U.S. housing market, citing increased material and labor costs and higher write-downs, mainly from continuing weakness in the metro Detroit market.

Shares of Nokia Corp. rose 2.3% to end at $21.30 after UBS analyst Maynard Um listed several “good reasons” to buy the Finnish mobile phone giant’s stock. He said that Nokia’s competitive position and fundamentals in the mobile device industry are improving. While earnings expectations remain low, the company was returning a significant amount of cash to shareholders and opportunities existed for more operating efficiency gains.

Fannie Mae was in focus on news the mortgage giant had agreed to pay a $400 million fine to federal regulators to settle its $11 billion accounting scandal. It was alleged that it manipulated accounting rules in ways that helped increase bonuses for its executives. The stock gained almost 1% up $0.45 to close at $50.72.

Euronext the pan-European stock exchange operator has urged its shareholders to support a takeover bid from the NYSE Group Inc. over one by Germany’s Deutsche Boerse. In presentation, the company argued that the NYSE bid offers the best price, the greatest synergies and the most deliverable option. NYSE shares closed down $2.80 at $60.05.

U.S. light crude oil for July delivery climbed $1.80, or nearly 3%, to settle at $71.76 a barrel on the New York Mercantile Exchange.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter