Stocks struggle as Fed pledges aid if needed

But the Dow crawls back nearly to break even as the Federal Reserve extends a small stimulus move because of job growth and European worries. It promises more action if conditions worsen. Asian stocks drop on a weak China manufacturing report.

By Charley Blaine Jun 20, 2012 11:18AM
Charley BlaineUpdated: 11 p.m. ET

The Federal Reserve gave the stock market a little of what it wanted when policy makers agreed to extend a program for selling short-term securities and buying longer-term issues in a bid to encourage economic growth. And the Fed said it was ready to do more if needed.

The news was greeted at first with some cheer, but investors seemed to conclude the decision wasn't enough. After a day of seesaw trading, the major averages ended the day little changed. The Dow Jones industrials ($INDU) closed down 13 points to 12,824 after falling as many as 92 points after the Fed announcement and as many as 87 points after Chairman Ben Bernanke's news conference.

The central bank said it will keep its key federal funds rate near zero, a level likely to remain in place through late 2014. In a statement, the Federal Open Market Committee, the Fed's rate-making body, said the economy had softened since its last meeting in April, largely because of economic problems in Europe and Asia. Job growth has slowed, with the U.S. unemployment rate at 8.2% in May.

Many traders had hoped the Fed would start a new round of so-called quantitative easing, a broad program of purchases of government securities. Instead, the Fed opted to continue through the end of the year what's known as Operation Twist, the program of selling the short-term securities and buying longer-term bonds.

The Dow's loss was slight. The Standard & Poor's 500 Index ($INX) had nearly as small a loss: just 2 points to 1,356. The Nasdaq Composite Index ($COMPX) fared a touch better, rising 1 point to 2,930.

Article continues below.

The Nasdaq-100 Index ($NDX), which tracks the largest Nasdaq stocks, gained 3 points to 2,623. Apple (AAPL), which represents some 17% of the market capitalization of the index, was off $1.76 to $585.74, subtracting roughly 2 points from the index.

The market's decline came after a solid rally on Tuesday that saw the Dow rise 96 points. The Dow, S&P 500 and Nasdaq are up more than 6% since bottoming early in June, mostly in hopes of a big Fed move to stimulate the economy.

The Fed's decision came as European stocks moved higher. Greece finally swore in a new government, headed by conservative leader Antonis Samaras. And it appeared that Germany will give up its long-standing opposition to using eurozone bailout funds to buy up bonds from Spain and Italy. Yields on 10-year bonds from both countries were lower today.


A weak open on Thursday?

Futures trading suggests a week open for U.S. stocks after a flash purchasing managers index of manufacturing in China fell to 48.1 in June from 48.4 in May. It's the 8th consecutive month of contraction. New export orders fell to 45.9, the lowest level since March 2009, and input and output prices fell to their lowest levels in 2 years.


Asian stocks were mostly lower.


Here at home, reports are due Thursday on initial jobless claims, existing-home sales and manufacturing in the Philadelphia Federal Reserve Bank's service area. The Conference Board also reports on leading economic indicators.

Bed, Bath and Beyond's weak guidance may weigh on markets
Markets may be pressured on Thursday after Bed Bath & Beyond (BBBY) cut its per-share earnings guidance for the fiscal second quarter to 97 cents to $1.03. Wall Street has been expecting $1.08 a share. Shares were down 11% after hours to $65.55. The shares had fallen $1.05 to $73.67 in regular trading.

The guidance came after the company reported 89 cents a share in fiscal-first-quarter earnings, up 24% from a year ago and 4 cents better than expected. Revenue was up 5.1% to $2.22 billion.

Why the Fed didn't move further
The issue markets seemed to have with the Fed decision was this: Are conditions so bad that the central bank needs to bring really big guns to bear on the problem?

The conclusion one must take away from the Fed statement and Bernanke's news conference is "not yet." Yes, unemployment is at 8.2%. Yes, housing is still troubled, though showing signs of life, and, yes, Europe is a mess.

But the effects on the economy aren't clear, especially given that gasoline prices, probably the biggest drag on the economy this spring, have fallen more than 10% since early April.

If things do spin out of control, the Fed said it is "prepared to take further action as appropriate" to support the economy and keep inflation low. Bernanke repeated the statement several times during his news conference.

The Fed statement and Bernanke conceded that economic data early in the year led many, the Fed included, to believe an economic recovery with some strength had taken hold.

That's not the case, Bernanke said, and Fed governors and the presidents of the 12 Federal Reserve Banks cut their projections of growth, unemployment and even inflation from estimates they all made in April.

Energy prices -- New York close



Wed.

Tues.

Month chg.

YTD chg.
Crude oil (-CL)

$81.45

$84.35

-5.87%

-17.59%
(per barrel)











Heating oil (-HO)

$2.5874

$2.6351

-4.28%

-11.21%
(per gallon)











Natural gas (-NG)

$2.5170

$2.5450

3.92%

-15.79%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.5073

$2.5699

-7.91%

-5.65%
(per gallon)











Brent crude 

$92.69

$95.76

-9.01%

-13.68%
(per barrel)











Retail gasoline

$3.4870

$3.4970

-3.67%

6.44%
(per gallon; AAA)












Procter & Gamble weighs on the Dow; JPMorgan has some sizzle
Procter & Gamble (PG) shares were off $1.82 to $60.39 after the company warned that fiscal-fourth-quarter revenue and earnings would be lower than expected because of slower growth in Europe and China and a higher dollar.

P&G was the weakest performer among the 30 Dow stocks, subtracting more than 14 points from the blue-chip index.

JPMorgan Chase (JPM) was the Dow leader, up $1.74 to $36.45 on reports it has sold off most of its huge losing corporate credit position, which may result in a loss of several billion dollars. The gain added nearly 8 points to the Dow.

Sixteen of the 30 Dow stocks were higher, along with 191 S&P 500 stocks and 49 Nasdaq-100 stocks. The Dow crossed zero 48 times during the session.

Jabil Circuit (JBL) and J.C. Penney (JCP) were the S&P 500 leaders, up $1.33 to $20.75 and $1.24 to $23.49, respectively.

Pioneer Natural Resources (PXD) and health care information Cerner (CERN) were the laggards, down $4.32 to $86 and $3.40 to $83.51, respectively.

Check Point Software
(CHKP) and DirecTV (DTV) were the Nasdaq-100 leaders, with Cerner and Research In Motion (RIMM) the laggards. RIM was lower on reports it is laying off workers in small batches.

Interest rates move up; oil and gold drop
Interest rates moved higher before the Fed announcement, dropped for a time but finished higher. The 10-year Treasury yield was at 1.642%, up very slightly from Tuesday's 1.62%. The euro had moved to as high as $1.27243 but fell back to $1.2663, down 0.289 cents from Tuesday.

Crude oil (-CL) settled down $2.90 to $81.45 a barrel in New York after the Energy Department reported larger-than-expected domestic supplies of crude and gasoline. Brent crude, the benchmark North Sea oil, was off $3.21 to $92.55 a barrel.

The national average price of gasoline dropped to $3.487 a gallon, down from Tuesday's $3.497 a gallon, according to AAA's Daily Fuel Gauge Report

Gold (-GC) settled down $7.40 to $1,602.10 an ounce. Silver (-SI) was up 2.1 cents to $28.389. Copper (-HG) fell 4.6 cents to  $3.3875 a pound.

Short hits from the markets -- New York close



Wed.

Tues.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0800%

0.090%

14.29%

700.00%
5-year Treasury note 

0.744%

0.701%

10.88%

-10.36%
10-year Treasury note

1.642%

1.620%

3.86%

-12.24%
30-year Treasury bond

2.724%

2.727%

1.95%

-5.71%
Currencies











U.S. Dollar Index

82.114

81.966

-1.22%

1.98%
British pound

1.5691

1.5731

1.80%

0.99%
(in U.S. $)

 








U.S. $ in pounds

£0.637

£0.636

-1.77%

-0.98%
Euro in dollars

$1.27

$1.27

2.44%

-2.27%
(in U.S. $)

 








U.S. $ in euros

€ 0.790

€ 0.788

-2.39%

2.32%
U.S. $ in yen 

79.62

78.98

1.35%

3.26%
U.S. $ in Chinese

6.38

6.35

0.03%

0.91%
yuan











Canada dollar

$0.980

$0.983

1.16%

-0.14%
(in U.S. $)

 








U.S. dollar 

$1.021

$1.017

-1.15%

0.13%
(in Canadian $)

 








Commodities

 

 

 

 
Gold (-GC)

$1,615.80

$1,623.20

3.30%

3.13%
(per troy ounce)

 








Copper (-HG)

$3.388

$3.434

0.65%

-1.41%
(per pound)

 








Silver (-SI)

$28.3890

$28.3680

2.28%

1.70%
(per troy ounce)

 








Wheat (-ZW)

$6.6400

$6.4950

3.15%

1.72%
(per bushel)

 








Corn (-ZC)

$5.6650

$5.635

2.03%

-12.37%
(per bushel)

 








Cotton 

$0.7174

0.7405

-0.15%

-21.75%
(per pound)

 








Coffee

$1.5240

1.588

-6.47%

-33.64%
(per pound)

 








Crude oil (-CL)

$81.45

$84.35

-5.87%

-17.59%
(per barrel)










 

221Comments
Jun 20, 2012 11:59AM
avatar
This market is way over bought and this Government is way out of control. The American people who have their savings invested and depend on that savings for retirement are in for a huge surprise. The European problems are much bigger than we are lead to believe. GET OUT OF THIS MARKET WHILE YOU CAN!!!!


Jun 20, 2012 12:05PM
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Gee Let's do the same thing that didn't work the last 2 times and hope it works this time.

These moves by the FED are just delaying tactics by the Obama administration to keep things from collapsing completely before the election.

The only thing they are doing is keeping interest rates low so the banks can get cheap money to make thier balance sheets look good for the short term. The banks will still not loan any of this money because they realize that unemployed people won't be able to pay it back and the people who are employed have a good chance of joining the unemployed before too long anyway. They also realize that in the long run they will be able to just sit on the cash until interest rates rise and they will be able to make a killing on the all the cheap money they have.

Let's just stop all the meddling and let the markets determine the value of everything-not the government.

avatar
STOCKS STRUGGLE AHEAD OF THE FED???????????????

WTF IS THAT SUPPOSED TO MEAN?

DOES IT MEAN THAT THE FED IS RIGHT THERE, POISED TO HAND OUT MORE FREE MONEY TO EVERYONE EXCEPT THE PEOPLE WHO PAY THE TAXES, AND THAT SINCE THEY ARE "RIGHT THERE AND READY" TO HAND OUT OUR MONEY .........AGAIN! .................. THAT THE DROP OF THE INDEX IS IRRATIONAL????............WTF IS WRONG WITH THESE IDIOTS!



Jun 20, 2012 12:52PM
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Gustavo I agree they should work together.  The last time I seen that was after 9/11/01.  The probem we have is that all politicians have their own agenda and probably don't care much about the people they are representing.  All they care about is keeping their jobs and milk the cow dry!  I guess donkeys will be donkeys and elephants will be elephants.  Whether these 2 animals in human form can get along together is another story indeed!!!!!!!!!!
Jun 20, 2012 12:53PM
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NO MORE OBAMA IN NOVEMBER 2012!!!!!!!!!!!!
Jun 20, 2012 12:48PM
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Why don't the investors and all associated with Wall Street provide stimulus instead of the Federal Government always having to? There is another article on MSN titled Threats to Recovery may Stir Fed. to action.  The only major threat I see to the recovery is the Stock Markets themselves!!!!  When people see their savings as well as their long term investments going to pot at the hands of daily investors it's no wonder things are bad in the world today!  I am getting sick and tired of the federal government always kissing the butts of Wall Street to make them feel better about things.  In the end taxes will be raised because of all this stimulus and then Wall Street will be pissed off about that.
Jun 20, 2012 1:29PM
avatar
"The Capitalist intent is to make money not  help the people. "
And that is the way it is supposed to be.  The entrepreneurs of the US only concern should be to be competitive, innovative and successful.  It's not their job to be a social service.
That job belongs to the government.  It's job is to be the overseer.  It's function is to set the playing field rules in which the players perform within the business climate.
However, since the government is bought by money, the rules have shifted more towards the business's advantage at the expense of the workers.
Jun 20, 2012 12:47PM
avatar
We went from a 17 trillion dollar economy to 14 trillion and the feds are deficit spending to make up the difference to cushion the economy.  Boomers are reaching age 65 at about the rate of 300 K per month and many will retire out of the work force freeing up jobs for the unemployed. As the boomers leave, given time, the unemployment rate will continue to decline regardless of who the POTUS is. The bad part is since we have a trade deficit of about 50 billion a month (about 1/2 trillion a year), We'll still have less money flowing around in our economy. Our trading partners need to return the favor and buy US goods & services, or we should buy less of theirs.  Otherwise, we will continue to lose our currency out of the country.  Like a river flowing money and subsequently jobs from the US.
avatar
FOR AT  LEAST 4 YEARS WE ARE BOMBARDED WITH THE B/S TERM "ENTITLEMENTS".

ENTITLEMENTS, DESCRIBING ANY SITUATION IN WHICH ..........WE AMERICANS ..........GET TO SPEND .........OUR OWN TAX MONEY!

THE APE IN THE OVAL OFFICE CELEBRATES HIS LATEST CONQUEST .................. US, ............WHILE HE UNILATERALLY DECIDES THAT ADDING 800,000 PEOPLE WHO ARE .............NOT ..............AMERIC​​​​ANS, .............NOT ...........HIS CONSTITUENTS ............TO THE TAX USING ROLLS .................ALL​​​​ WHILE HAVING THE GUTS  ..........NOT ..........TO MENTION THE WORD ............E N T I T L E M E N T S!

AGAIN, DECIDES, THAT OUR MONEY IS BETTER SERVED ................... WITHOUT US AS A CONSIDERATION ......... AND BETTER SERVED  ................BY HANDING IT TO NON-AMERICANS ............WHO HAVE UNDOUBTEDLY BEEN A PART OF THE ALREADY 57% THAT .............. HAVE .................NOT​​​​...........BEEN PAYING TAXES UP TO NOW!

NOW, THE UNEMPLOYMENT IS SO WELL FIXED ....................​​​​.... THAT ADDING ANOTHER 800,000 THAT WILL, GIVEN ALL INFORMATION AVAILABLE ....................​​​​.. WILL PROBABLY BE GIVEN PREFERENTIAL TREATMENT IN GAINING A JOB  ................ OVER AMERICANS, AND AT THE EXPENSE OF AMERICANS CHILDREN ATTEMPTING FOR CAREERS, ...........AFTER, THAT IS .............THE ILLEGALS ARE GIVEN PREFERENTIAL TREATMENT IN GAINING A FREE EDUCATION!

ANYBODY CONSIDER HOW THIS HELPS FIX THE ALREADY GAPING HOLES ALREADY IN S/S, MEDICARE, AND MEDICAID, OR MORE DIRECTLY TO THE POINT ..............PLAIN F'CKS AMERICAN CITIZENS FOR THEIR RETIREMENTS FOR PROBABLY THE NEXT 6 DECADES MINIMUM!

ALL TO ADD A NEW POLITICAL AFFIRIMATIVE ACTION BENEFIT TO THE NEVER ENDING LIST THAT OBLAMO HAS RIDDEN TO GET TO HERE ...............ALL THIS TO ......BUY ........MORE VOTES FOR SOMEONE WHO WILL F'CK ANYONE TO GET WHERE HIS UNDESERVING AZZ WANTS TO GO!

F'CK THE PRESIDENT OF THE UNITED STATES..............​​​​....F'CK OBAMA!
Jun 20, 2012 12:45PM
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Looks like the plagiotropic parasites are getting ready to pump the market again - bend over and take it like a true American....WAFJ
Jun 20, 2012 1:32PM
avatar
Out of Bullets and still entrenched in "operation twist" along with the Central Banks all over the world.
Jun 20, 2012 4:03PM
avatar

Here's the problem: Ineptocracy:

A system of goverment where the least capable to lead are elected by the least capable of producing and where members of society least likely to sustain themselves or succeed are rewarded with goods and services paid for by the confiscated wealth of a diminishing number of producers.

 

 

 

Jun 20, 2012 3:25PM
avatar

What happened to the 3.7 trillion Wall Street loan the Fed gave the banks on top of the 800 billion TARP Funds. Lending is still tight and Wall Street was sitting on trillions before they got the unasked for .0003% loan.

 

The collaboaration between the Fed and Wall Street is criminal, banks giving .5% interest for our money for savings and investing our money in high interest instruments. We need a complete accounting of Fed activities and a Fed audit...

Jun 20, 2012 1:25PM
avatar
Bizarre, isn't it? Okay to more stimuli for banks buried in bad investments. Nothing for the nation gripped in total economic turmoil. Totally and utterly clueless.
Jun 20, 2012 4:48PM
avatar
Fed pledges aid if needed   I thought the Fed had no money, ie. that they were broke.  OH  I see   They are going to take money from us tax payers again or borrow from China    DAMN   STOP IT NOW
Jun 20, 2012 4:47PM
avatar

Notice to Wall Street,

 

No the FEDS don't need to do anymore at this point.  The tax payers of America are just going to let the chips lay where they hit the floor this time around!  You took the bets, not the tax payers!  If it goes belly up then let it be.  We don't need to fix your problems anymore.   You should stand on your own two feet and stop looking for handouts every time the world markets start to tank.    

 

Have A Great Day!

Jun 20, 2012 4:57PM
avatar

Who's kidding who? There is nothing that the FED can do to stimulate our economy.

There is nothing that Republican tax cuts can do to stimulate our economy.

There is nothing that the Democratic stimulus packages can do to stimulate our economy.

 

The only way to stimulate our economy and create JOBS, is to create a greater demand for domestic products. Do what ever it takes to get our balance of trade out of the RED and into the BLACK.

 I know if we put politics aside, we can solve this problem. If they need help, I'd be glad to help them through the problem solving process. This really isn't brain surgery. It's economics not politics.

 

On a personal note, consider buying American goods over foreign goods. I may be a little more expensive, but it is one way we can do our part to start creating more jobs.

Jun 20, 2012 2:42PM
avatar
How would you like to be 87 years old, own your home, be debt free with 400,000 in cash and recieve 1100 per month SS and 450 from other insurance returns.  The 1.25% is $6000 per year while when you retired 22 years ago it was $24,000 tax free from municipal bonds.   You now must live on $25,000 whereas 22 years ago you lived on $42,000 per year.  This is what Banking has done to my Mother.  These artificially low rates are killing mature Americans.  These are  people who worked hard, saved, and did the right things for themselves, their families, and their country.  We MUST get these rates raised. Contact your congressperson NOW.  These banksters are making hundreds of millions in bonuses by basicly stealing from old people.  We need to make them understand that older Americans have a stake in this thing as well.
Jun 20, 2012 3:02PM
avatar
Maybe Eric Holder and Jerry Sandusky can share a jail cell and save the tax payers a few $$$$.
Jun 20, 2012 4:35PM
avatar
"Treasury Secretary, Henry Morgenthau, angry at the Keynesian spenders, confided to his diary May 1939: “We have tried spending money. We are spending more than we have ever spent before and it does not work. And I have just one interest, and now if I am wrong somebody else can have my job. I want to see this country prosper. I want to see people get a job. I want to see people get enough to eat. We have never made good on our promises. I say after eight years of this administration, we have just as much unemployment as when we started. And enormous debt to boot.”



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