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Bargain hunters retreat

NEW YORK CITY — A big bounce in stocks faded Tuesday after investors worried that a slowdown in the economy would continue to pound the market.

The Dow Jones industrial average rose about 24 points in midafternoon trading after jumping nearly 172 the first hour of the day.

Retail stocks logged some of the biggest drops ahead of reports later in the week on June sales.
Investors are concerned that a weakening of the recovery will keep cautious consumers out of stores. Macy’s Inc. fell 2.9 percent, while Nordstrom Inc. lost 1.4 percent.

Investors tried in early trading to recover some of the big losses that piled up in the past two weeks following disappointing economic reports. Traders initially shook off a midmorning report that growth in services businesses slowed last month. The Institute for Supply Management, a trade group of purchasing executives, said its services index fell to 53.8 from 55.4 in May. Economists polled by Thomson Reuters forecast 55.0. A reading above 50 indicates growth.

The weaker showing wasn’t a surprise to investors who have been seeing lackluster economic numbers pound stocks. The Dow has dropped 7.3 percent in the past two weeks and on Friday closed at its lowest level since early October. The index is down 13.6 percent from its 2010 high of 11,205 in late April. The drop led some institutional buyers to hunt for beaten-down stocks in early trading.

“There are pockets of opportunity out there. There are some areas with good valuations,” said Aaron Reynolds, senior portfolio analyst at Robert W. Baird in Milwaukee. He warned that uncertainty about the direction of the economy would lead to choppy trading.

Analysts also said that there weren’t any major headlines to ease the worries about the economy. That left the market’s early climb susceptible to a reversal.

Brian Dolan, chief currency strategist at, in Bedminster, N.J., noted that prices in the Treasury market remained higher. That signals that worries about the economy remain.

“We’ve obviously ratcheted down the outlook and now it’s a question of how much further,” Dolan said, referring to the economy. “From here I would expect to see further weakness.”

In midafternoon trading, the Dow rose 28.08, or 0.3 percent, to 9,714.64. The broader Standard & Poor’s 500 index rose 2.94, or 0.3 percent, 1,025.52, and the Nasdaq composite index rose 1.87, or 0.1 percent, to 2,093.66.

Stocks fell on Friday, the last trading day before the Independence Day holiday, after a report found that employers didn’t ramp up hiring as much as economists had forecast. It was the second straight month hiring by private employers failed to meet expectations.

Meanwhile, bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.95 percent from 2.98 percent late Friday.

Falling stocks narrowly outpaced those that rose on the New York Stock Exchange, where volume came to 700 million shares, compared with 626 million traded at the same point Friday.