Stocks skidded Wednesday as testimony from Federal Reserve Chairman Ben Bernanke rattled the market.
Stocks had struggled all day as Morgan Stanley and Apple gave the market a boost this morning after smashing earnings expectations but weakness in techs and retailers dragged on the market. Bernanke's comments helped push the market decidely lower.
"The sudden sell-off is a culmination of several weeks of poor economic news, which investors were happy to conveniently ignore while hoping for a wishful earnings season. The chairman's comments are simply reinforcing what we already knew and helping to provide octane to the beginning of a bear run. Investors should brace themselves that stocks will severely cool down for the remainder of the summer," said Todd M. Schoenberger, managing director of LandColt Trading.
The Dow Jones Industrial Average lost 109.43, or 1.1 percent, to close at 10.120.53, after two straight days of gains.
The S&P 500 and Nasdaqalso fell more than 1 percent. The CBOE volatility index, widely considered the best gauge of fear in the market, was at 26 at the closing bell.
The key words that may have done it were "unusually uncertain," which the Fed chairman used to describe the economic outlook.
"Even as the Federal Reserve continues prudent planning for the ultimate withdrawal of monetary policy accommodation, we also recognize that the economic outlook remains unusually uncertain," Bernanke said in pre-prepared remarks. "We remain prepared to take further policy actions as needed to foster a return to full utilization of our nation's productive potential in a context of price stability."
Apparently, that was a little more hawkish than many had expected.
"This statement reads like a Fed chairman way more concerned about draining liquidity as opposed to providing further stimulus. I would argue the market, being unconvinced in the recovery, is taking this as a too-hawkish statement," said Dan Greenhaus, chief economic strategist at Miller Tabak.
Despite the market volatility, some experts told investors that this is a good chance to buy stocks.
"U.S. large cap stocks represent a once in a lifetime opportunity, in my opinion to buy the best quality companies in the world at bargain prices," said Bill Miller, chairman of Legg Mason in a commentary to his clients. "The last time they were this cheap relative to bonds was 1951."
Apple shares jumped almost 1 percent after the iPod maker reported record revenue numbers. At least eight brokerages raised their price targets on the firm, including JPMorgan, which raised its price target on Apple to a whopping $400.
But tech stocks overall were weak, with Yahoo down 8.5 percent after a disappointing earnings report. At least seven brokerages either downgraded their ratings or cut their price targets on the stock amid weak revenue worries.
Results are due out from eBay , Qualcomm and Starbucks after the bell.
