Stocks ended mixed Tuesday after the Fed released minutes from its last meeting saying the economy would have to get much worse before it provided more support.
The Dow Jones Industrial Average gained 4.99 points to close at 10,014.72 after rising more than 63 and falling more than 67 earlier Tuesday.
The S&P 500 eked out a slim gain of 0.41 points to close at 1,049.33, while the Nasdaq fell 5.94 points to close at 2,114.03.
All major indexes racked up the worst record for August since 2001, although the Dow, S&P 500 and Nasdaq are still higher for the third quarter.
The Dow lost 451.22 points or 4.3 percent, compared with a loss of 5.45 percent in August 2001. The blue-chip index is still up 2.5 percent for the third quarter.
The S&P lost 52.27 points this month, or 4.7 percent, compared with a loss of 6.4 percent, in August 2001. The index is still up 1.8 percent for the third quarter.
The Nasdaq lost 140.67 points in August, or 6.2 percent, compared to a loss of 221.7 points, or 11 percent, in August 2001. The index is up 0.23 for the third quarter.
On Tuesday, telecoms, financials and utilities rose, while technology and health care stocks fell. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 27.
At the last Federal Open Market Committee meeting, several members said the Fed should consider more stimulus if the economy weakens, and that reinvesting in mortgage-backed securities, in addition to Treasury securities, "might become desirable if conditions were to change," according to minutes released at 2 p.m. Tuesday. (Read an excerpt of the Fed minutes).
Investors may have sold on the news once they realized the Fed doesn't appear ready to act immediately, as had been thought after comments by Fed officials last week at Jackson Hole, said Dan Cook, senior market analyst at IG Markets.
"The market was expecting it to be a more imminent event," Cook said.
Still, Cook noted, the market didn't sell off markedly and participants may have just viewed the news as an excuse to take profits on a day of mixed economic signals, and before a series of job-related news later this week, including the release of August non-farm payrolls on Friday.
Also, market pros noted that trading volume has been light all month. It was at the lowest of the year on the NYSE on Monday.
It's a trading environment and it's hard to be a fundamental investor in this type of volatile environment, Scott Black, president of Delphi Management, said on CNBC.
"The market continues to be choppy," Black said. "Even though stocks are statistically cheap...macroeconomics dominate individual companies' earnings here."
The tech sector was among the weakest Tuesday. Shares of Dell fell after S&P downgraded its rating on the PC makerto "sell" from "hold" citing concerns that Dell will bid higher for 3Par to boost its data-center product line-up. However, Dell is reportedly planning to drop out of the bidding for 3Par in the wake of Hewlett-Packard's higher bid. Dell has until Wednesday to match HP's $30 per share offer.
Research In Motion shares tumbled more than 5 percent after an analyst at Pacific Crest said in a research note that RIM's new BlackBerry Torch smartphone has failed to boost the company's sales at AT&T. Also, Bernstein Research lowered its price target on the BlackBerry maker to $40 from $55, saying RIM is facing more threats from Apple's iPhone and smartphones running on Google's Android operating system.
Shares of Apple are slightly higher, meanwhile, ahead of the computer maker's press conference on Wednesday. The company hasn't said what the conference is about, but rumors are Apple will introduce a new iPod as well as a successor to Apple TV.
Google was slightly lower after the search engine giant said it is set to roll out a major update to its Gmail service,which will include a new "priority inbox" to separate a user's more important e-mail from other messages.
And Cisco shares were down significantly for a second day after rumors the Internet equipment maker has made an offer to acquire Skype before the firm completes their IPO, according to TechCrunch.
VMWare announced it is acquiring private analytics firm Integrien and identity and access management company TriCipher.
Shares of Deere were higher after the company said it would sell its wind power business to electric utility company Exelon for about $860 million.
Monsanto was among stocks that led the S&P 500 lower after it tumbled more than 5 percent. The world's largest seed producer and maker of RoundUp gave a full-year 2010 earnings estimate earlier Tuesday that fell below expectations.
Saks soared nearly 20 percent following rumors that a group of private equity firms may make a bid for the luxury retailer, according to a British newspaper.
Teen retailers saw an initial boost after some analyst upgrades, although they ended lower. Ratings for Abercrombie & Fitch and Gap were raised to "outperform" from "market
A study has shown that an experimental drug from Bristol-Myers Squibb and Pfizer is shown to reduce the risk of stroke by more than half compared with aspirin. Also, Jefferies raised its rating on Bristol-Myers to "buy" "from "hold."
In the day's economic news, a bright spot came from The Conference Board, which reported its Consumer Confidence Index for August was 53.5, up from a revised 51.0 in July, and better than the 51.0 forecasted. While positive, the reading is line with consumer confidence a year ago, meaning little has changed in the minds of consumers.
While the confidence number was "powerful," Jack Ablin, CIO at Harris Private Bank, said renewed consumer confidence won't be enough to boost the economy. Also, CEO confidence has sunk to low levels, Ablin said, which doesn't bode well for job creation.
"My concern is that consumers may have a lot of confidence, they just don’t have a lot of money," Ablin said.
Also, the S&P/Case Shiller composite index of 20 metropolitan areas rose 0.3 percent in Junefrom May on a seasonally adjusted basis. The rise was better than the 0.2 percent increase expected by economists polled by Reuters, though slower than the 0.5 percent rise in May.
The Federal Deposit Insurance Corporation announced fewer U.S. loans were 90 days or more past duein the second quarter, the first decline seen in more than four years.
The bleaker news was from a reading of business activity in the Midwest, where The Chicago Purchasing Managers index came in at 56.7, a low level for the year, and weaker than the 57.6 expected for August. The index was 62.3 in July.
Gold prices rose to a two-month high, above $1,250 an ounce, amid a flurry of end-of-month buying.
Meanwhile, oil tumbled 3.72 percent to $71.92 a barrel as traders positioned ahead of Wednesday’s weekly inventory reports, which are forecast to show that domestic crude stockpiles rose for the second straight week last week. For the month, oil fell 9 percent, halting a two-month winning streak.
Hurricane Earl is now a Category Four storm with leisure travelers likely to be affected based on Earl's current track. Major cruise lines have already rerouted ships, skipping or changing stops to avoid the storm's path, and the airlines are making plans for possible flight disruptions.
On Tap This Week:
WEDNESDAY: August auto sales; weekly mortgage applications; Challenger job-cut report; ADP employment report; ISM mfg index; construction spending; weekly oil inventories; Fed's Fisher speaks; Apple event; earnings before the bell from Borders and Heinz.
THURSDAY: August chain store sales; weekly jobless claims; productivity and costs; factory orders; pending home sales; earnings before the bell from Del Monte, after the bell from H&R Block
FRIDAY: August jobs report; Fed's Lockhart speaks; ISM services index; earnings before the bell from Campbell Soup.
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