Stocks fluctuated Monday as investors did a little buying after four days of heavy selling.
The Dow Jones industrial average erased its early losses and was up 11 points. Other major stock indexes rose slightly. Interest rates dropped as investors looking for safe investments bought U.S. Treasury notes and bonds.
The market initially pulled back after a regional manufacturing report fell short of forecasts and Japan became the latest country to show signs of slowing growth. Both reports raised investors' concerns about the pace of the global economic recovery. Analysts said Monday's trading was just 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.
In midday trading, the Dow rose 10.82, or 0.1 percent, to 10,313.97. The Standard & Poor's 500 index rose 1.50, or 0.1 percent, to 1,080.75, while the Nasdaq composite index rose 13.40, or 0.6 percent, to 2,186.88.
About three stocks rose for every two that fell on the New York Stock Exchange, where volume came to 288.5 million shares.
Investors continued buying Treasurys Monday, 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 2.60 percent from 2.68 percent late Monday. 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.
Investors who are concerned about the U.S. economy got some bad news from overseas Monday. 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.
Meanwhile, the Federal Reserve Bank of New York said manufacturing activity in the state rebounded slightly this month after falling sharply in July. Despite the modest gain, activity did not expand as much as had been forecast, which indicates that economic growth remains tepid.
The New York Fed's Empire State Manufacturing Index rose to 7.1 in August from 5.1 in July. Economists polled by Thomson Reuters forecast the index would rise to 8. It was 19.6 just two months ago.
Regional manufacturing reports have shown a broad slowdown in recent months, a trend seen in other industries as well. It is particularly discouraging because manufacturing had provided the most consistent signs of growth during the first few months of the year.
The reports are the latest to indicate that the global economy is growing, but not as fast as it did during the first few months of the year. The slowdown has concerned traders who were predicting growth to pick up during the second half.
"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."
The news about the housing market was also discouraging. The National Association of Home Builders said its monthly index of builders' sentiment fell in August for the third straight month.
Rubino said the weak housing market will force the government to keep interest rates low for a long time. That makes bonds an attractive investment right now because there is little fear that interest rates will climb. Higher rates eat into returns on bonds.
Lowe's Cos. said Monday its quarterly profit and revenue rose, though both measures fell short of forecasts. The home-improvement retailer also lowered its full-year revenue forecast.
Shares of Lowe's rose, climbing 40 cents, or 2 percent, to $19.99.
Overseas, Japan's Nikkei stock average fell 0.6 percent. Britain's FTSE 100 and Germany's DAX index both rose less than 0.1 percent. France's CAC-40 fell 0.4 percent.