Stocks Pare Losses as Commodities Gain
Stocks declined Tuesday, after a four-day winning streak, as a wholesale-prices report triggered worries about inflation as the Fed meeting began. Energy stocks gained as commodity prices rose but financials remained weak.
This came after the Dow, the S&P 500 and the Nasdaq all closed at 2009 highsMonday, with the Nasdaq now up more than 40 percent for the year.
Inflation at the wholesale levelsurged 1.8 percent in November, reflecting price jumps in energy and other products.
The jump in inflation comes as the Fed kicks off a two-day monetary-policy meeting today. Economists will be watching closely to see if the Fed keeps its pledge to keep rates low for an "extended period" — or if this inflation report is a game-changer that causes policy makers to temper that language.
But Joel Naroff of Naroff Economic Advisors pointed out that the pop in inflation at the wholesale level hasn't yet reached consumers.
"When it came to consumer goods, the changes were totally mixed, which tells me we don’t have a major, broad based price increase trend under way," Naroff wrote in a note to clients. "[T]he pathway from wholesale costs to retail prices is not direct so let’s not get too worried about inflation yet."
In the day's other economic news: New York State manufacturing weakened unexpectedly and homebuilder confidence fell — both in December.Industrial production rose a better-than-expected 0.8 percent in November.
The dollar rallied, hitting a 10-week high against the euro, amid worries about European banks and rising inflation after the PPI report.
Oil broke above $70 a barrel, snapping a nine-day losing streak, and gold topped $1,125 an ounce.
Stocks were lower across the board but Wells Fargo rose after the bank became the last of the major banks to repay its TARP funds, reaching an agreement with the government late Monday on paying back the $25 billion it received under the program.
The payback will come after Wells Fargo completes a $10.4 billion stock offering. That follows similar news from Citigroup earlier on Monday.
There was some controversy surrounding the Wells Fargo offering: The stock was delayed from opening for 50 minutes this morning so Goldman Sachs could allocate the 425 million shares, even though the books closed at 9 a.m. ET, which ticked off floor traders.
Home Depot shares got a boost from President Obama, who spoke about economic-stimulus measures related to home improvement and energy efficiency at a Home Depot store in Alexandria, Va.
AIG shares slipped after CEO Robert Benmosche told the Wall Street Journal that top executives have been struggling financiallyafter the company's near collapse last year.
Boeing finally test launched its 787 Dreamliner today after multiple delays.
Dow component and NBC Universal parent General Electric told investors that it expects revenue to be flat next year — analysts expect it to be down about 10 percent — but said the "worst is behind us" in financial services.
Though the earnings calendar is light, Best Buy reported its third-quarter results. The electronic retailer topped estimatesin the latest period, but its shares moved lower as the company's forecast fell short, reflecting a lower-than-expected profit margin. Best Buy has been cutting prices in an attempt to lure shoppers, but it is hurt its bottom line.
After the closing bell, we'll get results from software maker Adobe Systems .
TUESDAY: GE annual outlook meeting; Fed's two-day meeting begins; producer prices; Empire State manuf. survey; industrial production; housing-market index; Earnings from Best Buy, Adobe
WEDNESDAY: Weekly mortgage apps; consumer prices; housing starts; current account; weekly crude inventories; Fed announcement; Earnings from Hovnanian
THURSDAY: Bank of Japan monetary policy meeting; Bernanke confirmation vote; weekly jobless claims; leading indicators; Philly Fed survey; Earnings from FedEx, Rite Aid, Oracle, Palm and RIMM
FRIDAY: Bank of Japan meeting continues; U.S. budget deadline; quadruple witching
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