* S&P; 500 nears correction territory
* German Chancellor Merkel proposes greater fiscal union
* Facebook hits new intraday low
* Dow off 0.1 pct, S&P; up 0.01 pct, Nasdaq up 0.5 pct
By Caroline Valetkevitch
NEW YORK, June 4 (Reuters) – The S&P; 500 ended flat on
Monday after recent sharp losses, though worries about the
European debt crisis and weaker U.S. data kept investors wary of
equities.
Signs of economic weakness around the globe and Europe’s
intensifying debt crisis have rattled investors, who have been
dumping riskier investments like commodities and equities for
the safety of government bonds.
The flat session follows Friday’s slide of more than 2
percent that erased the Dow industrial average’s gains for the
year. The S&P; 500 is now up just 1.6 percent for 2012 and is
approaching correction territory, which would be a decline of at
least 10 percent from its most recent high in April.
“I think we dropped a little bit too far, too fast, and the
reaction may have been a little overdone regarding Friday’s
employment report,” said Fred Dickson, chief market strategist
at D.A. Davidson & Co., in Lake Oswego, Oregon.
In the near term, “our feeling is we’ll drift slowly lower
until we get some sort of positive news out of Europe.”
Friday’s U.S. jobs report was much weaker than expected.
On Monday, U.S. data showed orders for manufactured goods
dropped 0.6 percent in April, its third decline in four months
and confounding expectations calling for a 0.2 percent gain.
In a potential boost to markets looking for measures to end
the debt crisis, German Chancellor Angela Merkel is pressing for
much more ambitious measures, including a central authority to
manage euro-area finances and major new powers for the European
Commission, European Parliament and European Court of Justice.
Spanish Prime Minister Mariano Rajoy is advocating a direct
European rescue for the country’s banks with moral support from
the European Commission, but Germany appeared cool to such a
move for the euro zone’s fourth biggest member.
The S&P; financial sector, seen as most exposed to
Europe’s debt crisis, was down 1 percent. The S&P;’s economically
sensitive industrial sector was also down 1 percent,
leading the day’s declines.
The Nasdaq ended higher, helped by gains in Amazon,
up 3.1 percent at $214.57.
The Dow Jones industrial average slipped 17.11
points, or 0.14 percent, to 12,101.46 at the close. The Standard
& Poor’s 500 Index inched up just 0.14 of a point, or
0.01 percent, to 1,278.18. The Nasdaq Composite Index
rose 12.53 points, or 0.46 percent, to close at 2,760.01.
The market’s technical picture remains bearish, with the S&P;
500 on Friday breaking below its 200-day moving average. In the
near term, however, the benchmark S&P; 500 is in an area that
could attract buyers.
“Given the magnitude of the decline, you are in an area
where oversold conditions are approaching,” said Bruce Zaro,
chief technical strategist at Delta Global Asset Management in
Boston.
In the banking sector, Morgan Stanley has come under
pressure as bond markets treat the bank as a junk-rated company,
and the higher borrowing costs could already be putting it at a
disadvantage even before an expected ratings downgrade. The
bank’s stock is off 41.9 percent since late March. On Monday,
Morgan Stanley’s stock fell 2.9 percent to $12.36.
Shares of social networking company Facebook Inc kept
s truggling to find solid footing, hitting a new low of $26.44
since its debut slightly more more than two weeks ago. The stock
was down 3 percent at $26.90.
