After months on hiatus, volatility is back on Wall Street.
Stocks ended higher on Monday after another day of big swings. Stronger reports on manufacturing and housing gave the market an early boost but a rise in the dollar and worries about the soundness of an eight-month rally chipped away at the gains. A late surge left the Dow Jones industrial average with a gain of 77 points but still down by about half from its best levels of the day.
After nearly unbreakable gains since midsummer, trading has become much rockier in recent weeks as investors worry that the pace of the economic recovery they have been counting on will be hard to maintain.
Jittery traders have pushed the market around in ways more reminiscent of the huge swings of a year ago than the smoother advance stocks have seen since the early spring. The Dow has gained or lost more than 100 points in six out of the last seven days. The last time the Dow had as long a streak of triple-digit moves was in late March, shortly after major stock indexes bounced off 12-year lows.
Good news can still lift the market, but those gains are now less likely to hold than they were earlier in the year. The market jumped last Thursday after the government reported the economy grew at a 3.5 percent pace in the July-September quarter, well ahead of expectations.
But that enthusiasm faded as many noted that much of the growth came from government spending programs which are winding down. Likewise, many companies are reporting stronger-than-expected earnings, but in many cases the gains came from cost-cutting instead of higher sales. On Friday the Dow slumped 250 points as those worries deepened, more than erasing the 200-point gain from the day before.
Analysts say many investors still expect the economy to improve but are worried it won't happen as quickly as they had hoped. The signs of investor anxiety are clear. The Chicago Board Options Exchange's Volatility Index, known as Wall Street's fear gauge, crept up to 31.84 Monday — a fresh four-month high — before ending at 29.78.
"It's a flip of a coin right now," said Jeffrey Frankel, president of Stuart Frankel & Co. "You never know what you're going to get the next day when you come in to work."
As the market enters the final months of the year, the Standard & Poor's 500 index is up 54.2 percent from a 12-year low in March even after losing 2 percent in October.
"The question is, is the trend changing?" said Jim Dunigan, managing executive of investments at PNC Wealth Management.
Trading is likely to be volatile this week as investors sift through a flood of economic data, including the government's monthly employment report on Friday. The Federal Reserve will also weigh in on the economy after a two-day policy meeting on Wednesday.
On Monday, the Dow rose 76.71, or 0.8 percent, to 9,789.44, its fourth gain in 10 days. The broader Standard & Poor's 500 index rose 6.69, or 0.7 percent, to 1,042.88, and the Nasdaq composite index rose 4.09, or 0.2 percent, to 2,049.20.
The seesaw trade came after the Institute for Supply Management said manufacturing activity grew in October at the fastest pace since April 2006 and much better than expected. Meanwhile, the National Association of Realtors said pending home sales increased for the eighth straight month in September, also topping expectations.
Separately, the Commerce Department said construction spending increased 0.8 percent in September, matching the gain in August. Economists had been expecting a drop.
The reports goosed stocks higher in the morning but weren't enough to hold the gains through the afternoon as the dollar rose against other major currencies. That briefly hurt commodity prices and exporters.
Financial stocks faltered briefly after Jon D. Greenlee, the Federal Reserve's associate director for banking supervision and regulation, told lawmakers that "significant stress and weaknesses" remain in the financial system and that banks face more heavy losses on loans.
Citigroup Inc. fell below $4 for the first time since August, giving up 10 cents, or 2.4 percent, to $3.99.
Investors also found optimistic news. Ford Motor Co. surprised investors by reporting that deep cost cuts and the government's Cash for Clunkers rebates helped it earn nearly $1 billion in the third quarter. The stock jumped 58 cents, or 8.3 percent, to $7.58.
Advancing stocks narrowly outpaced those that fell on the New York Stock Exchange, where consolidated volume came to 6.3 billion shares, compared with 6.8 billion Friday.
Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.42 percent from 3.39 percent late Friday.
Oil rose $1.13 to settle at $78.13, while gold rose on the New York Mercantile Exchange.
The Russell 2000 index of smaller companies fell 0.37, or 0.1 percent, to 562.40.
Overseas, Britain's FTSE 100 rose 1.2 percent, Germany's DAX index added 0.3 percent, and France's CAC-40 rose 0.9 percent. Japan's Nikkei stock average dropped 2.3 percent.