Stocks Hold Losses After Bernanke Testimony
U.S. stocks remained in the red Thursday after Federal Reserve Chairman Ben Bernanke's testimony in Washington.
The Dow Jones Industrial Average, S&P 500 index and Nasdaq all held their losses under 1 percent, as the market digested Bernanke's comments.
The Fed chairman said risks to economy have increased and signaled that the central bank is prepared to keep cutting rates. He said new hiring has slowed and that consumers, pinched by soaring energy prices and sagging home values, are likely to tighten their belts further, though growth should pick up later in the year. (Read the full text of Bernanke's prepared remarks.)
In opening statements, Treasury Secretary Henry Paulson said economic growth will be slower than in recent years, reiterating recent remarks he's made before Congress. Paulson said he expects the tax rebates coupled with investment incentives for businesses should help create more than half a million jobs before year end.
Intel led Dow decliners after Goldman Sachs removed the chip maker from its "conviction buy list," according to Thomson Financial. Goldman Analyst James Covello was quoted as saying that, of all the tech companies he covers, Intel is the most exposed to slowing demand from the economic slowdown. Still, Covello kept his "buy" rating on the stock with a six-month price target of $30.
J.P. Morgan , Hewlett-Packard and IBM rounded out the Dow's top four decliners.
A mixed bag of economic news left investors idle earlier in the morning.
The Labor Department reported that first-time claims for unemployment benefits fell by 9,000 to 348,000 last week, more than the 6,000 economists had expected. However, the four-week moving average, which smooths out weekly volatility, rose to its highest level since October 2005, right after Hurricane Katrina.
The U.S. trade deficit narrowed a sharper-than-expected 6.9 percent in December to $58.8 billion, despite record prices for oil. Another month of record exports helped shrink the annual trade deficit for the first time in six years. The smaller-than-expected trade gap is expected to prompt economists to raise their estimates of fourth-quarter U.S. economic growth.
UBS shares were under pressure after the Swiss bank revealed $26.6 billion in exposure to risky US mortgagesthat do not include subprime loans. The company also warned of a difficult year in 2008.
"This will raise concerns about further major writedowns in 2008," said Bear Stearns analyst Chris Wheeler in a note.
Shares of bond insurer MBIA jumped after the company said it has completed a $1 billion common-stock offering. Shares of Rival Ambac also rose.
Executives from both MBIA and Ambac are expected to testify about bond insurers' problems in an 11:30 a.m. hearing before a House subcommittee.
Marriott reported a 20 percent drop in its quarterly profit and issued a weaker-than-expected forecast as the economic slowdown is affecting the hotel industry.
Network Appliance shares skidded after the data-storage company forecast lower-than-expected revenue due to banks cutting orders and Citigroup cut its rating on the stock to "hold" from "buy." Jefferies and RBC cut their price targets on the stock.
Goodyear Tire & Rubber shares moved higher after the company posted a profit amid higher tire prices.
Top cable operator Comcast reported a quarterly profit excluding items of 20 cents a share, 3 cents better than Wall Street estimates. The company also said it would pay a dividend of 25 cents per share, payable April 30.
The saga of Microsoft's attempt to take over Yahoo took a new turn when news emerged that Yahoo is holding talks with News Corp. about swapping MySpace and other News Corp.-owned online properties in exchange for a stake of 20 percent or more in Yahoo.