Stocks Relinquish Gains After Fed News - Market Overview * US * News * Story

LATEST STOCK MARKET DATA

Hot & Cold Sectors
Tracking the major movements across the best & worst performing industry sector indexes.
Dow Components
Top Gainers & Losers
Major Indexes & Stocks to Watch

MORE HEADLINES

Markets | Economy | Companies

- Health Care Bill Clears First Senate Hurdle

FEATURED SLIDESHOWS

Runway Angels
The superbowl of fashion shows, models walk down the runway at the 2009 Victoria's Secret Fashion Show.
The Richest Members of the US Congress
Recently, the Center for Responsive Politics found that there are 237 millionaires in the US Congress.
10 Tips to Get Out of Debt
Renowned financial author Gail Vaz-Oxlade takes a tough-love approach to helping couples in a financial crisis to face reality.

FEATURED QUIZZES

How Much Do You Know About Green?
Green has become part of our everyday lives. Green is everywhere-- energy, clothing, food, housing, transportation. It's a big business and a global business.
The Billionaire BFF's
Philanthropists. Bridge partners. Hockey players. Which responses are based on facts from Buffett's and Gates' real lives?
The Many Myths of Coca-Cola
Can you tell which statements are true, and which ones are just rumors?

SPECIAL REPORTS

Winterizing Your Portfolio
If 2009 was the winter of our discontent, will 2010 be a winter wonderland for investors? A lot depends on the recovery—or lack thereof.
Investor's Guide to Real Estate
Some even say the long-awaited recovery is here. Regardless, buyers and sellers alike can profit from our guide.
Alternative Investing
Stocks and bonds? Sure. But it's a big world out there for investors.

CNBC ON DIGG

Stocks Video Gallery

Options Action Web Extra

The Options Action traders discuss viewer mail, with CNBC's Melissa Lee.

Final Call

The Options Action traders discuss the trades their looking at next week, with CNBC's Melissa Lee.

Upside Call

Options vs. stocks, and Chevron rallies 14 percent, but the options trade is multiples higher, with CNBC's Melissa Lee a...

In the Money Now

The S&P hits key technical levels, so the traders look at what will take stocks higher. Also, with tech and financials s...

Larry's Last Word

CNBC's Larry Kudlow gives his final thoughts of the evening.

More Videos

Stocks Relinquish Gains After Fed News

Published: Thursday, 24 Sep 2009 | 11:09 AM ET

Text Size

By: Cindy Perman
CNBC.com

An opening pop fizzled Thursday after the Federal Reserve announced plans to start unwinding some stimulus measures and a report showed existing-home sales fell last month.

Stocks had opened higher after a report showed an unexpected drop in jobless claims last week.

Major U.S. Indexes

.DJIA

.NCOMP

.SPX

The Fed said it was scaling back two emergency-lending programs: It's paring its 28-day term-auction facility to $25 billion from $75 billion as well as its 84-day TAF, a program to offer banks access to short-term emergency funds that it's considering eliminating early next year.

"These schedules are consistent with the intention ... to gradually scale back these facilities in response to continued improvements in financial markets," the Fed said in a statement.

Meanwhile, existing -home sales fell 2.7 percent in August, a surprise as economists had expected a 2.9 percent increase, particuarly after a sharp increase in July.

FOR INVESTORS

Earlier, investors had cheered a report that showed the number of U.S. workers filing new claims for jobless benefits fell by 21,000 last week, when economists were expecting an increase of 5,000. A less-volatile gauge of claims fell to an eight-month low.

"The message here is that the labor market’s healing process is a slow one," Joshua Shapiro, chief U.S. economist at MFR Inc., wrote in a note to clients, adding that households will be "contending with a weak labor market for quite some time."

This came after stocks shed 0.8 percent Wednesday following a late selloff. Stocks had initially risen after the Fed statement as investors cheered the Fed's improved language on the recovery. But doubt began to creep in as investors worried that the Fed's announcement to slow the pace of buying mortgage debt was the equivalent of firing a warning shot that it plans to start unwinding stimulus. That sparked worries about how the economy would fare without being propped up by the government.

The moves of the past few days highlight just how conflicted investors are: On one hand, they want to see signs of an economic recovery. On the other, they're somewhat disturbed by the idea that the Fed may tighten sooner rather than later.

In Thursday's action:

Citigroup [C Loading... () ] is expected to narrow the focus of its branch network to six major metropolitan areas, according to a Wall Street Journal report. The bank will focus on New York, Washington, Miami, Chicago, San Francisco and Los Angeles, paring business in Boston, Philadelphia and Texas.

The market also is watching as the largest run of initial public offerings to hit Wall Street in two years accelerates.

Lithium-ion car-batter maker A123 Systems [AONE Loading... () ], a company born out of the MIT school in Massachusetts, debuts on the Nasdaq today. The company increased the numer of shares in its IPO and priced them late Wednesday at $13.50, raising much more than expected. The stock will trade under the symbol, "AONE."

A123, which is poised to benefit from the increasing popularity of hybrid and electric cars, is stirring speculation that this is the next big thing — the new ethanol.

But Ford [F Loading... () ] slipped after JP Power & Associates said expects auto sales to plunge in September, back to their worst levels of 2009, as the glow of the "Cash for Clunkers" program has worn off.

Electronic Arts [ERTS Loading... () ] shares tumbled after Microsoft [MSFT Loading... () ] shot down talk that it might take over the videogame maker.

Amid talk that it could be another terrible holiday season, there was a bright spot for retailers: Goldman Sachs upgraded its price targets on several retailers, saying it thinks September-to-date trends are robust and could continue into the holiday season. Among those Goldman raised its price target on were: Abercrombie & Fitch [ANF Loading... () ], AnnTaylor [ANN Loading... () ] and Chico's FAS [CHS Loading... () ].

Homebuilders took a hit after the disappointing existing-home sales report and ahead of tomorrow's new-home sales reading. Beazer [BZH Loading... () ] and Hovnanian [HOV Loading... () ] fell sharply.