Stocks struggle as Fed pledges aid if needed

Updated: 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.

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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-quarte​r 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)