NEW YORK (AP) — A promise from Italy to fast-track austerity measures nudged stock indexes slightly higher Tuesday. Investors are still worried that Italy might become the next European country to need help managing its debts.
A successful auction of new Italian government bonds also reassured markets that the country will be able to manage on its own without backstops from international lenders like the International Monetary Fund. A default by Italy, the third-largest economy in Europe, would cause far more damage to the global financial system than one by Greece, which is much smaller.
The Standard & Poor’s 500 index and the Dow Jones industrial average bounced between small gains and losses. The Standard & Poor’s 500 index rose 1 point, or 0.1 percent, to 1,321 in afternoon trading. The Dow rose 2 points to 12,512.
Italian finance minister Giulio Tremonti said budget cuts originally scheduled for August would be passed by this Sunday. The news sent Milan’s main stock index up 1.2 percent.
U.S. bank stocks rose as tensions eased about Europe’s financial crisis. If that region’s debt troubles spread beyond Greece and Ireland to much larger economies like Italy and Spain, global banks would likely sustain the most losses since they hold bonds issued by European countries. They would also be affected if a default slows down global lending. Wells Fargo & Co. rose 1 percent.
Technology stocks were the weakest in the market following poor results at chip makers. The Nasdaq composite was the only major stock to fall all day. It was down 7, or 0.3 percent, to 2,795.
Microchip Technology Inc. plunged 13 percent, the most of any stock in the S&P 500 index, after the chip maker said it expected lower quarterly revenue and income because of waning demand from car makers. That pushed the stocks of other chip makers lower too. Novellus Systems Inc. fell 11 percent after lowering its own profit forecast, and Texas Instruments Inc. fell 3.9 percent.
Investors also felt some relief after a meeting of 17 finance ministers Monday resulted in a statement that implied they were open to buying distressed Greek bonds.
“They are trying to staunch the bleeding,” said Quincy Krosby, chief market strategist for Prudential Financial. “That has reassured investors that there are, in essence, buyers of last resort.”
The yields on the government bonds of Italy and Spain shot up this week as investors lost confidence in the quality of their debt. That increased borrowing costs for those countries and raised the grim possibility that they might need a financial backstop like those arranged for Greece and Ireland. Some of the concerns about Italy eased Tuesday after a successful auction of new government debt.
Investors had assumed Italy would be able to manage its heavy debt load in part because of a high personal savings rate among its citizens. But after concerns arose last week that Italian and Spanish banks might not pass upcoming stress tests, stock in those countries’ largest banks fell sharply. Results of the tests are expected to be announced Friday.
At the center of the panic over European government debt is the fear that the European banking system could be hurt by the weakening finances of countries on Europe’s periphery like Greece, Ireland and Portugal. That would affect a global network of financial institutions, potentially freezing up lending and affecting U.S. companies that do business internationally.
Investors are also worried about U.S. debt. The looming Aug. 2 deadline to resolve contentious budget negotiations and signs that the U.S. economy could be in for an extended downturn are also pushing stocks lower.
Radiant Systems Inc. rose 6.5 percent after saying ATM maker NCR Corp. would buy the company, which makes equipment and software for the hospitality and retail industries, for $1.2 billion. But Central Vermont Public Service Corp. fell 2.5 percent after it announced Canada’s Gaz Metro would buy the utility for $472.4 million. Rival bidder Fortis cancelled its offer.
International Game Technology rose 2.6 percent after a Sterne Agee analyst raised its rating on the company, saying it would likely sell more casino games.
News Corp. rose 1 percent after the beleaguered media company said it would buy back $5 billion worth of its own stock. The company is facing opposition in England to its takeover of British Sky Broadcasting, a highly profitable satellite television operator, because of a widening phone-hacking scandal at its newspapers in Britain.