Dow falls 109 on Bernanke's 'uncertainty'

While the Fed chairman sees a moderate recovery, he worries that jobs will be slow to bounce back. Stocks tumble. Apple, Wells Fargo and Morgan Stanley shares are strong.

By Charley Blaine Jul 21, 2010 2:17PM
Charley BlaineUpdated: 9 p.m. ET

Stocks slumped this afternoon after Federal Reserve Chairman Ben Bernanke said the economic outlook is "unusually uncertain" and that he is worried about the long-term costs of high unemployment.

Bernanke's comments in prepared congressional testimony tipped over a stock market that had been flat to modestly higher beforehand. The market was supported by strong earnings from a number of companies, including Apple (AAPL), Morgan Stanley (MS), Wells Fargo (WFC), Freeport-McMoRan Copper & Gold (FCX), Coca-Cola (KO) and United Technologies (UTX).

About the only good news from the selling was that stocks did not finish at their lows on the day.

The Dow Jones industrials ($INDU) finished down 109 points, or 1.1%, to 10,121. The blue chips had been down as many as 164 points around 3 p.m. ET. The Standard & Poor's 500 Index ($INX) was down 14 points, or 1.3%, to 1,070, and the Nasdaq Composite Index ($COMPX) dropped 35 points, or 1.6%, to 2,187.

Crude oil fell $1.03 to $76.55. Gold settled up 10 cents to $1,191.80. Interest rates were lower, with the 10-year Treasury yield falling to 2.92% from 2.932% on Monday. The dollar was higher against major currencies.

Investors were impressed with Qualcomm's (QCOM) and eBay's (EBAY) results, issued after the close.  But they were selling Starbucks (SBUX).

Thursday will see earnings from 3M (MMM), American Express (AXP), AT&T (T) and Microsoft (MSFT). More important will be the weekly report on jobless claims and the June report on existing home sales from the National Association of Realtors. A decent jobless claims report could set off a snap-back rally. (Microsoft publishes MSN Money.)

Energy prices -- New York close
 

Wed.

Tues.

Month chg.

YTD chg.
Crude oil 

$76.56

$77.58

1.23%

-3.53%
(per barrel)











Heating oil

$1.9892

$2.0247

0.38%

-5.97%
(per gallon)











Natural gas 

$4.5130

$4.5900

-2.23%

-19.01%
(per mil. BTU)











Unleaded gasoline

$2.0678

$2.0786

0.35%

0.73%
(per gallon)











Retail gasoline

$2.7180

$2.7190

-1.34%

2.99%
(per gallon; AAA)












Real estate, jobs weigh on economy
The Bernanke testimony before the Senate Banking Committee ended what had been a standoff for stocks.

While the recovery is continuing, Bernanke said, it is still being dragged down by problems in real estate and the dismal jobs picture.  "In all likelihood, a significant amount of time will be required to restore the nearly 8 1/2 million jobs that were lost over 2008 and 2009," he said.

And he conceded the European debt problems have affected this economy as well.

The central bank has trimmed its forecast for growth in 2011, and there's been enormous worry since the end of April (and a 10% decline in stock prices) that the economy was stalling out again.

Bernanke did outline strategies that the Fed may employ to prevent inflation or something like the housing bubble that erupted between 2004 and 2007. At the same time, he said the Fed will act if the economy needs more boosting. But he conceded the central bank has only just begun to think about the strategies.

Bernanke's testimony came after President Obama signed the financial regulation reform legislation this afternoon.

Energy, technology, financial stocks among the losers
Only four of the 30 Dow stocks were higher -- Coca-Cola, Caterpillar (CAT), AT&T and 3M. Only eight of the stocks in the Nasdaq-100 Index ($NDX.X) were higher. The index, which tracks the largest Nasdaq stocks, was down 23 points, or 1.3% to 1,820.

Coca-Cola and United Technologies both reported higher profits and boosted guidance. Coca-Cola closed up 1.6% to $54.08. United Technologies was down 0.8% to $67.03.

Apple closed up 0.9% to $254.24 after reporting blowout fiscal-third-quarter earnings late Tuesday.  The stock had been up as much as 5.3% right after the open.

The company said it  earned $3.51 a share on revenue of $15.7 billion, ahead of Street estimates of $3.12 a share and revenue of $14.77 billion. Net income of $3.25 billion was up 78% from a year ago. Revenue was up 61%. Apple

Apple helped such stocks as SanDisk (SNDK) and Corning (GLW). SanDisk, however, faded to a 0.4% decline to $42.12. Corning was up 0.8% to $16.80.

But the rest of technology was middling. Microsoft was off 1.4% to $25.12. Hewlett-Packard (HPQ) was off 2.4% to $45.48. Dell (DELL) was down 2.2% to $13.07, and IBM (IBM) was off 1% to $125.27.

Even Best Buy (BBY), a big seller of Apple products, was struggling, down 2.1% to $33.84.

Wells Fargo and Morgan Stanley shine
Financial stocks put up good numbers today -- and mostly weren't rewarded for them.

The exceptions were Wells Fargo, up 0.6% to $26.06, and Morgan Stanley, up 6.3% to $26.80.Wells Fargo

Morgan Stanley's gain was its best since May 2009.

Earnings from continuing operations were 80 cents a share, which included a 20-cent tax benefit, compared with the consensus estimate of 47 cents.

Wells Fargo profits beat Wall Street estimates, as loan losses eased, even in its huge mortgage lending basis. Morgan Stanley

Other banks also reported strong results. But their shares were struggling. Result: The S&P 500 financial-sector exchange traded fund (XLF) (technically the Financial Select SPDR) was off 1.6% to $14.04.

Copper jumps on Freeport results
The two strongest areas of the market were industrial and materials stocks. Both were higher after Freeport-McMoran Copper & Gold reported strong earnings. Shares were up 2.7% to $66.06.

The "physical markets are really stronger than economic indicators in the U.S.," CEO Richard Adkerson said during the company's analysts call.

The company reported second-quarter profit that topped analyst estimates. Freeport-McMoRan Copper & Gold

Copper jumped 3.1% to $3.09 a pound in response. Copper had fallen 10% this year through Tuesday on concern that slowing economic growth would erode demand.

"We feel very, very positive about copper," Adkerson said. "Our order books are filling up more strongly than they have in some time."

Short hits from the markets -- New York close
 
  Wed.

Tues.

Month chg.

YTD chg.
Treasury yields




 





13-week Treasury bill

0.150%

0.150%

-11.76%

200.00%
5-year Treasury note 

1.647%

1.675%

-8.25%

-38.68%
10-year Treasury note

2.892%

2.932%

-2.00%

-24.75%
30-year Treasury bond

3.901%

3.963%

-0.20%

-15.94%
Currencies







 

 
U.S. Dollar Index

83.593

82.929

-3.12%

6.87%
British pound

$1.5209

$1.5284

1.66%

-5.98%
(in U.S. $)











U.S. $ in pounds

£0.6575

£0.6543

-1.63%

6.36%
Euro in dollars

$1.2817

$1.2895

4.49%

-10.57%
(in U.S. $)











U.S. $ in euros

€ 0.7802

€ 0.7755

-4.29%

11.82%
U.S. $ in yen 

87.26

87.42

-1.41%

-6.17%
Canada dollar

$0.960

$0.959

1.85%

0.92%
(in U.S. $)











U.S. dollar 

$1.042

$1.042

-1.79%

-0.96%
(in Canadian $)











Commodities

 

 

 

 
Gold

$1,191.80

$1,191.70

-4.34%

8.72%
(per troy ounce)











Copper

$3.0930

$3.0015

4.83%

-7.58%
(per pound)











Silver

$17.803

$17.6930

-4.84%

5.69%
(per troy ounce)











Corn

$3.7975

$3.8150

7.20%

-8.38%
(per bushel)











Crude oil 

$76.56

$77.58

1.23%

-3.53%
(per barrel)










 

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[BRIEFING.COM] The headlines generally favored Tuesday being another good day for the stock market.  Instead, it was just a mixed day with modest point changes on either side of the unchanged mark for the major indices.

For the most part, the stock market was a sideshow.  The main trading events were seen in the commodity and Treasury markets, both of which saw some decent-sized losses within their respective complex.

Dollar strength was at the heart of the weakness in ... More


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