US stocks inch higher but worries about Europe linger

AP Photo/Richard Drew

NEW YORK — Hopes that the US economy is continuing to improve are sending stocks higher on Wall Street. The Dow Jones industrial average was headed for its best day since May 1.

The market’s gains are being held back by continuing worries that Greece’s political deadlock could fracture the European Union and roil global markets.

The Dow was up 48 points at 12,679 as of noon Wednesday. The Standard & Poor’s 500 added five points to 1,335. The Nasdaq composite rose 6 point to 2,899.

Home builder stocks rose after the Commerce Department said builders started work on new homes at an annual pace of 717,000 last month, 2.6 percent more than in March. It was a heartening sign for the beleaguered housing market, which seems to be forming a bottom and starting to recover. Construction rose for both single-family homes and apartments.

Also, the Federal reserve reported that US factory production increased 0.6 percent in April, helped by a gain in auto production. Busier factories have driven stronger hiring this year and helped the economy grow.

Target Corp. rose after a strong earnings report. Target said revenue at stores opened at least a year rose 5.3 percent, the strongest performance in six years for that period. Target’s results illustrate that Americans are beginning to spend cautiously as economic uncertainty persists. Though the job market is still shaky, falling gas prices have given shoppers hope.

However, all the positive news wasn’t enough to get investors excited enough to start buying stocks in earnest.

“We’re in a period where there’s little conviction to buy,” said Richard Cripps, chief investment officer at broker Stifel Financial. “The road ahead is too uncertain because of European concerns and the Presidential election later this year.”

As signs of a global economic slowdown persist, prices of commodities have come off their highs. Crude oil continued its march downwards from $105 at the beginning of the month and was trading at $93 at midday, down $1 on the day. Gold prices fell $10 to $1,547, the lowest since December. The dollar continued its two-week climb against the euro.

In Europe, a potentially chaotic situation was developing in Greece, where power-sharing talks collapsed Tuesday and new elections were called for next month. There is already concern in other European countries about how a possible Greek exit from the euro would affect the rest of the continent.

On Wednesday, Spain’s prime minister warned that the country, which is trembling under a 24.4 percent unemployment rate, could be locked out of international markets due to problems in the EU.

Financial pressures extend well beyond Europe too. The Indian rupee hit an all-time low against the dollar as investors seek safe places to put their money. The rupee sank to 54.44 against the dollar Wednesday, surpassing the prior low of 54.39 on December 15.

Among other stocks making big moves:

– JC Penney plunged 17 percent, the most in the S&P 500 index, after the retailer reported a bigger-than-expected first-quarter loss. Sales plummeted as shoppers are rejecting the retailer’s new plan of getting rid of big sales throughout the year in favor of everyday low pricing.

– Abercrombie & Fitch fell 13 percent after reporting that its first-quarter net income shrank 88 percent because of higher costs and declining sales in established stores and in Europe.

– General Electric rose 4 percent, the most of the 30 stocks in the Dow, after the company said its finance unit will pay a special dividend of $4.5 billion to the parent company this year. It had suspended the payments in 2009 during a freeze in credit markets.