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Stocks flat as malaise persists and investors play it safe

| Tuesday, Aug. 17, 2010

NEW YORK -- Stocks managed to break a four-day losing streak yesterday by the slimmest of margins. Investors had no change of heart about the economy, however, and again poured money into the safety of Treasurys.

The Dow Jones industrial average fluctuated along with the other big market indexes throughout the day. The Dow closed down just over a point, but the other indexes had slight gains.

Investors were dealing with more downbeat economic news, but it wasn't bad enough to set off significant selling. A report on manufacturing in New York state fell short of forecasts and Japan became the latest country to show signs of slowing growth. The reports raised investors' concerns about the pace of the global economic recovery.

Analysts said yesterday's short buying spurt was a pause following four days of losses that sent the Dow down almost 400 points.

"The market is really being controlled by (short-term) traders," said Mike Rubino, CEO at Rubino Financial Group in Troy, Mich. "The long-term investor doesn't appear to be anywhere in sight."

Without those long-term investors, trading is expected to remain erratic for the foreseeable future.

The Dow fell 1.14, or 0.01 percent, to 10,302.01. The Standard & Poor's 500 index rose 0.13, or 0.01 percent, to 1,079.38, while the Nasdaq composite index rose 8.39, or 0.4 percent, to 2,181.87.

The Nasdaq, which has fallen more than the other indexes, got a lift from technology company deals. Among them, Dell Inc. said it is buying 3Par Inc., a maker of data storage equipment, for about $1.13 billion.

Investors continued buying Treasurys, driving interest rates lower. U.S. government bonds are looking more and more appealing to investors wanting to find a safe place for their money as the economy cools and stocks drop.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.58 percent from 2.68 percent late yesterday. Its yield is often used to help set interest rates on mortgages and consumer loans.

The yield on the 10-year note is near the level it last hit in March 2009 when stocks fell to a 12-year low.

"It's a sign of pessimism that investors accept that low a yield," said Joe Heider, principal at Rehmann Financial in Cleveland.

Japan said its economy grew just 0.1 percent in the second quarter, well below the 1.2 percent growth in the first quarter and short of expectations. The report follows signs last week that both the U.S. and Chinese economies are not growing as fast as earlier in the year.

Regional manufacturing reports have shown a broad slowdown in recent months. That's particularly discouraging because manufacturing provided the most consistent signs of growth during the first few months of the year.

"We're scared of our own shadows here," said Jamie Cox, managing director at Harris Financial Group in Richmond, Va. "We need to readjust our signs from above-trend growth. If not, we're going to be perennially disappointed."

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