Dow Turns Positive Amid Bargain Hunting

Cindy Perman|

Stocks were under pressure Monday as a dismal jobs report last week and expectations for a gloomy earnings season nagged at the market.

The shift in mood has sent the CBOE Volatility index, widely considered the best gauge of fear in the market, back up to around 30. And investors have shifted back into defensive stocks after a couple of months in cyclicals like tech stocks.

But the Dow turned positive in afternoon trading as investors took advantage of the selloff and did some bargain hunting.

Stocks had gotten a brief reprieve from their negative morning after a report showed improvement in the services sector, which accounts for 80 percent of the economy.

The ISM reported its gauge of the service sector improved to 47in June from 44 in May, the best reading in nine months. The index shows the sector is still in contraction mode, though it's moving ever closer to the 50 mark, which indicates expansion in the industry.

But the jobs report proved more memorable for investors — even after the three-day holiday weekend in the U.S.

Employers slashed 467,000 jobsfrom nonfarm payrolls in June and the unemployment rate ticked up one-tenth of a percent to 9.5 percent. Economists had expected a much smaller job loss of 365,000 but a slightly higher unemployment rate of 9.6 percent.

"The jobs report was weaker than expected and it throws a little cold water on the economic-rebound story," said Alan Gayle, senior investment strategest at RidgeWorth Capital Management. "I think the market is growing a little impatient with less-bad reports — The market was hoping for less-bad and it got worse than bad."

Comments from U.S. Vice President Joe Biden over the weekend fueled investors concerns: Biden said the Obama administration "misread" the depth of the economic troubles it inherited.

And, as the green-shoots talk wilts, investors are also bracing for gloomy earnings.

Earnings season unofficially kicks off this week with a report from Dow component Alcoa after the bell Wednesday. Economists expect a third straight lossfrom the aluminum giant.

Alcoa was the biggest decliner on the Dow Monday, followed by Bank of Americaand Caterpillar .

Bank of America eclipsed UBS   as the world's top wealth manager, according to a survey by specialist consultancy Scorpio Partnership, but the survey indicated another tough year for the industry.

Bank of America also approved about $713 million in dividend payments to the government on the $15 billion in Troubled Asset Relief Program funds the bank received.

ExxonMobil and Chevron were also pretty big drags on the Dow as oil prices plunged Monday. The price of US light, sweet crude dropped more than $3 to below $64 a barrelas concerns mounted over the strength of consumers.

Shares of General Motors skidded. A bankruptcy judge approved the sale of GM's assetsto the "new GM," backed by the government, clearing the path for automaker to get out of bankruptcy protection quickly.

Techs declined as investors rotated out of cyclicals and into defensive stocks. Both Apple and Microsoft were down more than 1 percent.

Wells Fargo plans to expand its securities business, according to a Wall Street Journal report that said Wells Fargo Securities would offer merger advice, stock and bond underwriting, loan syndications and fixed-income trading.

Investors will focus later this week on a meeting of the G8 industrial nations. The summit was expected to highlight signs that economies were stabilizing, but emphasize that it was too early yet to withdraw policy stimulus.

And President Barack Obama arrived in Russia for a summit with President Dmitry Medvedev, during which John Deere , PepsiCo and Boeing will announce more than $1.5 billion worth of deals in the country.

In other corporate news, global miner Rio Tinto agreed on Monday to sell its Americas food-packaging assets for $1.2 billion to packaging group Bemis , raising yet more much-needed cash for the indebted miner. Rio shares dropped 5.6 percent premarket.

— Peter Schacknow, Senior Producer, CNBC Breaking News Desk, contributed to this report.

This Week:

TUESDAY: No major market-moving events expected
WEDNESDAY: Weekly mortgage applications; weekly crude inventories; consumer credit; Earnings from Family Dollar, Alcoa
THURSDAY: Chain-store sales; weekly jobless claims; wholesale trade; Fed's Duke speaks; Earnings from 3Com
FRIDAY: Import/export prices; international trade; consumer sentiment

Send comments to