Stocks Slip After Fed Offers No Hint on QE3
Stocks slipped slightly after Federal Reserve chairman Ben Bernanke acknowledged that the pace of the economic recovery is slower than expected, but gave no further clue for new stimulus plans.
The Dow Jones Industrial Average declined after finishing higher for the fourth straight day in the previous session.
Among the blue-chip components, GE and Boeing slipped.
The S&P 500 gained and the tech-heavy Nasdaq were also flat. The CBOE Volatility Index, widely considered the best gauge of fear in the market, traded near 18.
Among key S&P sectors, energy and materials were higher, while utlities and consumer staples.
The Federal Reserve said the pace of the recovery was proceeding more slowly than it had expectedthough it was primarily because of temporary factors. In addition, the Fed's policysetting committee said it will maintain interest rates at exceptionally low levels for "an extended period."
Meanwhile, the FOMC downgraded economic growth forecast by half a percentage pointand expects higher unemployment until 2013 in addition to slightly more inflation.
"The reduced pace of the recovery partly reflects factors that are likely to be temporary," Bernanke said during the press conference. "Consequently...the committee expects that the pace of economic recovery will pick up overcoming quarters."
Some experts said traders were disappointed that Bernanke failed to expand on further plans to stimulate the economy, while others noted that it may never happen unless macro data continues to disappoint.
"The only way that [the Fed] could possibly consider QE3 is if the macro data refuses to improve and the market starts to take a real hit—another 15 percent from here," said Kenny Polcari, managing director of ICAP Equtiies. "But if that doesn’t happen and if things just muddle along, then I don’t think there will or should be any QE3."
BofA , Citigroup and JPMorgan gained even after JMP Securities cut its share views on the banks.
In earnings news, FedEx gained after the shipping service giant posted better-than-expected profits and expect robust earnings in 2012. S&P Equity raised its price target on the firm to $120 from $113 and JPMorgan resumed coverage with an "overweight" rating.
Rival UPS also rose following the news.
Adobe slipped after the software maker reported earnings and revenue that topped analysts forecasts Tuesday but its outlook fell short. In addition, Brigantine cut its price target on the firm to $34 from $36.
CarMax jumped more than 5 percent to lead the S&P gainers after the used-car retailer's quarterly results blew past estimates as consumer continued to stay away from purchasing new cars in a slow-recovering economy.
And Jabil Circuit gained after the contract manufacturer reported earnings that beat estimates, thanks to a jump in revenue, but the firm expects current quarter profit largely below forecast. Meanwhile, RBC cut its price target on the company to $25 from $30.
Bed, Bath & Beyond is scheduled to post earnings after-the-bell tonight.
L3 Communications gained after investment firm Relational Investors is expected to report the largest stake in the major defense contractor, according to the WSJ.
Yahoo was flat after the search-engine firm said they have made progress towards an agreement with Alibaba over the e-payment unit Alipay.
Research In Motion slipped to hit another 52-week low after the BlackBerry maker was removed from UBS' list of top tech picks. RIM shares have plunged more than 50 percent year-to-date.
Meanwhile, Dentsply International advanced after the firm agreed to buy AstraZeneca's dental implants and medical devices unit for $1.8 billion in cash.
Oil extended gainsafter crude supplies dropped by 1.7 million barrels last week, according to a government report. U.S. light, sweet crude traded near $95 a barrel, while London Brent crude was above $113.
On the economic front, weekly mortgage applications fell last week as refinance demand dropped and interest rates rose, according to the Mortgage Bankers Association.
The confidence vote was passed in parliamentand enables the Greek government to push ahead with tough austerity measures which are key to avoid a default. However, fears that new bailout funds will not be unlocked remain a cause for concern.
European markets were slightly lower on Wednesday morning, coming off Tuesday’s highs ahead of a vote of confidence for the Greek government.
Coming Up This Week:
WEDNESDAY: FOMC meeting announcement, Ben Bernanke speaks; Earnings from Bed Bath & Beyond
THURSDAY: Weekly jobless claims, new home sales, money supply, Yahoo shareholders meeting; Earnings from ConAgra, Discover Financial, Oracle, Accenture, Micron
FRIDAY: Durable goods, GDP, corporate profits
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