US shares steady on new Fed stimulus hopes

The New York Stock Exchange building. Photo / Thinkstock

A helpful hand from Uncle Sam's bank, or at least the expectation of such, is all that was need to provide some stability to Wall Street overnight.

After crashing yesterday - and taking Asian and European stocks sharply lower too, US stocks have steadied ahead of today's close.

In late trading, the Dow Jones industrial average was down 25.47 points, or 0.21 per cent, at 11,841.15. The Standard & Poor's 500 Index was up 0.57 point, or 0.05 per cent, at 1,254.62. The Nasdaq Composite Index was up 12.46 points, or 0.47 per cent, at 2,681.70.

It's been a volatile session compounded by more data pointing to slower economic growth in the US The service sector expanded in July at its slowest pace since February 2010. And while the ADP National Employment Report showed employers added 114,000 jobs last month, it doesn't change the immediate labour market outlook - grim at best.

"The data is a little bit all over the place these days and the risk is things are not looking as bright as they were in June or prior to that," Rudy Narvas, senior economist at Societe Generale in New York, told Reuters.

The focus now is on the July payrolls report to be released on Friday. The economy is expected to have gained 85,000 jobs, according to a Reuters survey, but that level of increase won't be enough to push the unemployment rate below its current 9.2 per cent.

Amid the weak data, rumours are swirling that the Federal Reserve is preparing to bolster the economy.

Pacific Investment Management Co. and BlackRock, which together oversee almost US$5 trillion, say the US economy is stalling.

Bill Gross, who runs the world's biggest bond fund at Pimco, and Peter Fisher, head of fixed income at BlackRock, have said the Fed is preparing measures to counter the slowdown, according to a Bloomberg report.

One stock guru is saying it's time to buy stocks, given their recent slide.

US stocks have become a "strong buy", Barton Biggs, managing partner and co-founder of Traxis Partners in New York, told Bloomberg. "I do feel right now this is not the time to put out any shorts and I am very tempted to think this is a time to be buying stocks pretty aggressively," said Biggs, whose firm manages US$1.4 billion.

As currency markets assess the potential for intervention by Japan's central bank, the Swiss central bank moved to check the franc's surge.

The Swiss National Bank said it considered the Swiss franc to be massively overvalued at present. "This current strength of the Swiss franc is threatening the development of the economy and increasing the downside risks to price stability in Switzerland. The SNB will not tolerate a continual tightening of monetary conditions and is therefore taking measures against the strong Swiss franc."

The question is how firm a stance will the Fed take with the US economy. At least the dithering in Washington among lawmakers has passed - for the moment.

Gold bugs don't appear ready to rethink their strategy. The precious metal has surged for a second day. Spot gold was last quoted at US$1,668.06 an ounce, up 0.5 per cent on the day at 1410 GMT, having hit a record US$1,672.65 earlier.

"The lack of a decent gold pullback has left many investors feeling frustrated and patience for a better buying opportunity is now wearing quite thin, which is why gold has attracted very decent buying this week," UBS strategist Edel Tully said in a note, according to Reuters.

Tully added that the bank had raised its three-month price forecast to US$1,850, from US$1,600.