Stocks End Lower Amid Fed Fatigue

Stocks ended lower Wednesday as enthusiasm for the Fed's near-zero target rate and willingness to do whatever it takes waned.

The Dow Jones Industrial Average shed 99.80, or 1.1 percent, to close at 8824.34, after gaining about 360 pointsin the prior session.

The S&P 500 index fell 1 percent, while the Nasdaq dropped 0.7 percent.

Macy's shot up more than 18 percent after the retail giant said it has amended a $2 billion credit agreement with Bank of American and JPMorgan, providing "substantial liquidity for the company to weather the current economic downturn."

Separately, closeout retailer Tuesday Morning said it has entered a new five-year, $150 million line of credit, which doesn't have financial covenants.

Several retailers shuttered their doors even before Santa's sleigh got off the ground, and analysts have said that there are more bankruptcies and outright closings to come. News of the credit agreements brought a big sigh of relief to the sector.

>> For the latest on how the holiday-shopping season is shaping up, check out our special Holiday Central section.

On Tuesday, the Fed set its target for overnight lending rates at a record low of zero to 0.25 percentrather than setting a single rate target, and said it would employ "all available tools" to battle the recession.

But some analysts started wondering what tools central banks really have, as the Fed's move may force others to follow suit. Others said the move may fuel a bubble in bonds as investors look for safe returns.

The Treasury doesn't plan to ask Congress for the rest of the $700 billion TARP money, at least not until Treasury Secretary Henry Paulson leaves office in about a month, Paulson told CNBC.

This could change if there is an emergency in the markets, Paulson said, but added that he does not expect any more big financial institutions to fail.

In the banking sector, Citigroup is combining its corporate and investment-banking businesses to streamline and cut costs, according to Reuters, while analysts told CNBC that the bank's "supermarket" model is dead. Its shares fell 4.9 percent.

Morgan Stanley shares rose 2.3 percent, recovering after the investment-bank-turned-bank-holding company reported a much wider than expected quarterly lossof $2.24 a year against analyst estimates of 33 cents.

Meanwhile, in the scandal of one of the biggest pyramid schemes in history, Securities and Exchange Commission Chairman Christopher Cox asked the agency's inspector general to investigate the SEC's conduct with regard to the alleged Ponzi-scheme linked to money manager Bernard Madoff, CNBC has learned.

>> MUST READ: Five lessons for investors from the Madoff scandal.

In Europe, BNP Paribas shares slumpedafter it said its investment-bank unit had a 710 million euro ($994.8 million) loss for the first 11 months of the year.

In other earnings news, General Mills shares ticked higher after the company, which makes everything from Cheerios to Betty Crocker cake mix, posted a higher-than-expected quarterly profit and raised its full-year forecast, helped by cost-cutting measures.

Homebuilder Hovnanian Enterprises reported a loss of $5.79 a share, much wider than Wall Street had expected. Revenue fell by nearly half to $721.4 million.

And, there was news of more job cuts — this time, from the pharmaceutical sector.

Bristol-Myers Squibb said it was cutting its workforce another 10 percent through 2010.

Apple shares continued to be under pressure, falling 6.6 percent, following news that CEO Steve Jobs won't deliver this year's keynoteat the Macworld Expo and that the company will pull out of the trade show after this year, reigniting concerns about Jobs' health.

Wal-Mart slipped after America's Research Group raised its outlookfor the holiday shopping-season, citing the discount giant's "domination" this season with its bargain-basement prices.

Asian markets closed mostly higher but European shares were trading in the red after opening higher.

Still to Come:

THURSDAY: Weekly jobless claims; Leading indicators; Philly Fed; weekly natural-gas inventories; Fed's Fisher speaks; Earnings from FedEx, Pier 1, Rite Aid, Oracle, Palm, Research In Motion
FRIDAY: Quadruple witching

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