Dow reverses, posts tiny gain

NEW YORK - The stock market's rally plodded along yesterday, sustained by gains in financial and industrial shares.

Major indexes overcame early losses and finished slightly higher. The Dow Jones industrial average added 37 points to set a fresh 2009 high. The Dow has risen for eight straight sessions, its longest winning streak since April 2007.

Volume has been extremely light as many traders go on vacation, adding to the market's recent choppiness. The day's economic news, including a slightly smaller-than-expected dip in initial unemployment claims and a benign reading on gross domestic product, did little to excite investors.

Analysts say the market has been running on its own momentum more than anything else, adding that a lot of the improving economic data have already been priced into stocks.

A lot of activity has also been driven by short-covering, analysts say, which tends to amplify gains. Short-covering occurs when investors must buy stock after having sold borrowed shares in a bet they would fall.

Traders have anticipated a pullback for weeks, but the dips that have occurred tend to be met with more buying.

"There is just too much cash sitting on the sidelines," said Phil Orlando, chief equity-market strategist at Federated Investors Inc.

The Dow rose 37.11, or 0.39 percent, to close at 9,580.63. The Dow's eight-session advance totals 445.29 points, or 4.87 percent.

The Standard & Poor's 500 index rose 2.86, or 0.28 percent, to 1,030.98, while the Nasdaq composite index rose 3.30, or 0.16 percent, to 2,027.73.

Big gains in a handful of financial stocks helped turn the market around. Shares of American International Group Inc. surged nearly 27 percent, rising $10.15 to close at $47.84, as analysts speculated the company might be reconciling with former chief executive officer Maurice "Hank" Greenberg, who could help bring private capital to the company. AIG shares have more than doubled in eight days.

CIT Group Inc. shares jumped 22.83 percent, adding 29 cents to close at $1.56. Shares of Citigroup Inc. rose 42 cents, or 9.07 percent, to $5.05.

Energy stocks, which had weighed on the market early in the day, pulled off their lows as oil prices turned higher. Like stocks, oil prices have been extremely volatile in recent weeks as investors try to determine whether current prices are warranted given still weak demand.

Crude for October delivery added $1.06 to settle at $72.49 a barrel on the New York Mercantile Exchange.

In other trading, the Russell 2000 index of smaller companies slipped 0.25, or 0.04 percent, to 583.77.

Asian stocks fell after China said it would cut investment in some industries. Japan's Nikkei stock average lost 1.6 percent, while China's main index fell 0.7 percent.

Britain's FTSE 100 fell 0.4 percent, Germany's DAX index fell 0.9 percent, and France's CAC-40 lost 0.5 percent.