Stocks were 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 fell more than 20 points, after rising more than 63 earlier Tuesday. The Dow fell nearly 140 points in the previous session.
Cisco , Boeing and Intel led decliners. JP Morgan, Merck and AT&T led advancers.
The S&P 500 and Nasdaq also fell. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 27.
Telecoms, financials and consumer staples rose, while technology and industrialstocks fell.
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 securites, 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 has 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.
The markets have had a pretty dismal August. Through Monday, the Dow was down more than 4 percent for the month, the worst showing for August since 2001 when it fell 5.5 percent. The Nasdaq was down 6 percent for August and the S&P fell more than 4 percent.
Trading volume was 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."
Homebuilders were mostly higher across the board, including D.R. Horton and Pulte Homes, following news that prices of U.S. single-family homes rose slightly more than expected in June.
But the tech sector remained weak. 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 almost 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.
Google was also 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 for the second day more than 2 percent 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 led the S&P 500 lower after it tumbled more than 7 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 more than 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 a boost after some analyst upgrades. Abercrombie & Fitch and Gap shares both rose about 1 percent after the companies' ratings 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 THURSDAY: August chain store sales; weekly jobless claims; productivity and costs; factory orders; pending home sales FRIDAY: August jobs report; Fed's Lockhart speaks; ISM services index
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