The Week On Wall Street: Hello, Goodbye 14,000
On the economic front, the June CPI report was mixed, but housing starts surprised with a gain.
At the end of a busy day for investors, the Dow had reduced a triple-digit loss to about 50 points.
"I think the Fed's downward revision of GDP for the remainder of this year and into 2008 is more at the heart of this selloff than anything else," said Marc Pado, U.S. market strategist at Cantor Fitzgerald. "The market is looking for the economy to reassert itself and it's a bit of a blow to the exception for future growth."
Another day of generally strong earnings and IBMin particular helped the Dow close above 14,000 for the first time ever. Motorola, however, was a major disappointment in the tech sector, posting a quarterly loss. Google shareswere also pounded in after-hours trading, following weaker-than-expected profit in what the company called a "seasonally slow quarter.”
Bernanke was back before Congress, paying particular attention to the housing slump. The Fed boss said that regulators had stepped up efforts to protect consumers from abusive mortgage practices, which contributed to the subprime mess.
"The large forces, such as liquidity which is very high and recent earnings are overcoming problems like subprime," according to Vinny Catalano, global investment strategist at Blue Marble Research. "So far it looks like the bias is still to the upside."
The S&P 500 also closed at a new record high, while the Nasdaq tacked on another three-quarters of a percentage point, regained the 2700 level.
Despite the decline, many analysts said the selloff wasn't cause for alarm.
"This drop is only going to be momentary," Sara Nunnally, senior analyst at Material Profits, told CNBC.com. "I would say we may have another 100-point drop and then find support at just about 13,700 on the Dow. After that, I think we will test 14,000 again."
Worries over the impact of the housing slump and losses from risky mortgages also weighed on stocks and the dollar, while government bond prices jumped.