Fed chief’s testimony cools hopes of new stimulus
By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) — U.S. stock indexes fell Thursday after Federal Reserve Chairman Ben Bernanke said the central bank was not ready to take immediate action to further bolster the economy.
The retreat wiped out the prior session’s gains, when some investors took Bernanke’s first day of testimony to Congress as a signal the Fed was getting ready to roll out more extraordinary stimulus, known as quantitative easing.
“Bernanke’s comments indicated there would be no more ‘juice,’ i.e. stimulus, forthcoming for the foreseeable future,” and that pushed stocks lower, said Brian Greenberg, owner of wealth-management firm Brian Greenberg & Associates in Marlton, N.J.
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Moody's puts U.S. on notice
Credit-rating companies indicate they are moving toward a downgrade of the U.S. government's debt in the midst of the debt-ceiling talks in Washington.
• The Tell: Market blog
• U.S. and Canada markets | Canada section
• European and Middle Eastern markets
• Asia — from Japan to China to Australia
• Latin America: Brazil, Argentina, Mexico, more
TOOLS AND DATA | Markets data menu
• My Portfolio: Know where your funds are?
• Real-time currency exchange rates
• After-hours stock screener
MARKET SECTORS | The Tell: Market blog
The Dow Jones Industrial AverageDJIA -0.44% closed down 54.49 points, or 0.4%, at 12,437.12. Alcoa Inc. AA +0.26% and DuPont DD -0.11% led drops in 23 out of 30 Dow components.
J.P. Morgan Chase & Co. JPM +0.12% led gainers for the blue-chip index, rising 1.8% after the company reported increased investment-banking fees bolstered second-quarter net income above estimates. Read analysis of J.P. Morgan earnings.
The S&P 500 Index SPX -0.67% declined 8.85 points, or 0.7%, at 1,308.87, with industrials leading declines among all 10 industry subsectors.
The Nasdaq Composite Index COMP -1.22% fell 34.25 points, or 1.2%, at 2,762.67.
The major indexes have now fallen for four of the past five sessions.
Data deluge
Stocks had started off the session on a high note after the government reported initial applications for jobless benefits slid to a three-month low last week. Read more on jobless claims.
But stocks came off their highs after Bernanke told Congress that the Fed wasn’t “at this point” prepared to take further action on the economy. Read details of Bernanke’s testimony .
Stocks on Wednesday snapped a three-day losing streak after Bernanke, in his first day of congressional testimony, suggested the Fed was open to more stimulus measures.Read more on Wednesday's stock action.
Markets shrub off debt tension
Despite a warning from Moody's on the U.S.'s credit rating, markets acted if a U.S. downgrade wasn't likely to happen, and kept up brisk trading. (Photo: AP Photo.)
Dan Greenhaus, chief global strategist at BTIG LLC, said Wall Street’s take on Bernanke’s Wednesday comments had been mistaken, and the Fed chairman did not imply that a third round of quantitative easing might be in store.
“He did not endorse any proposal, and the insinuation by some that he was gearing up for QE3 was a misreading,” Greenhaus noted.
For every stock that gained, four fell on the New York Stock Exchange, where 925 million shares traded hands.
Marriott International Inc.’s MAR -6.60% shares shed 6.6% a day after the hotel chain offered a lukewarm outlook for 2011.
Shares of ConocoPhillips COP +0.52% gained 1.6% after the oil company said it would divide into two entities. Read more on ConocoPhillips in Energy Stocks.
Ahead of the bell Thursday, the government said that retail sales edged up in June and that wholesale prices fell 0.4% last month. Read more on retail sales.
Late Wednesday, ratings firm Moody Investors Service warned it would lower the U.S. credit rating if an agreement to raise the government’s debt limit isn’t reached by Aug. 2.
The White House on Thursday said Democrats and Republicans agree on $1.5 trillion in spending cuts. The Obama administration made the statement as debt negotiations were set to resume. Read more on White House debt comments.
Uncertainty over the U.S. debt ceiling helped push gold futures higher to finish at a record $1,589.30 an ounce. Read more in Metals Stocks.
Kate Gibson is a reporter for MarketWatch, based in New York. Myra Picache in San Francisco contributed to this report.
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