Dow falls 119 as Bernanke speech disappoints

Updated at 6:32 p.m. ET

If you thought Wednesday's big rally was the start of a rebound off this summer's lows, you had to be disappointed today.

In the late morning, stocks appeared to be enjoying a solid rally. Alas, the market tumbled during and after Federal Reserve Chairman Ben Bernanke's Minneapolis speech.

The late-day selling could well make Friday difficult, regardless of what President Obama says this evening in an address to a joint session of Congress. The Standard & Poor's 500 Index ($INX) fell below 1,188, an important support level. That alone may generate new selling.

The problem with Bernanke's speech wasn't that he offered few details on what the Fed will probably try to boost the economy. It was that Wall Street had lavished high expectations beforehand. When the Street didn't get what it wanted, traders sold stocks and kept on buying the dollar, Treasury notes and Gold (-GC) and silver (-SI).

The Dow Jones industrials ($INDU) closed down 119 points, or 1%, to 11,296. The S&P 500 was off 13 points, or 1.1%, to 1,186, two points below that support level. The Nasdaq Composite Index ($COMPX) dropped 20 points, or 0.8%, to 2,529.

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Clarity from the Fed is what investors want, San Antonio money manager Wasif Latif told Bloomberg News. Until there is clarity, he said, "This manic-depressive market activity will probably continue."

Texas Instruments (TXN) shares fell 1.2% to $25.50 after the chip maker cut its third-quarter guidance, citing "broadly lower demand across a wide range of products, markets and customers." Revenue is projected at $3.23 billion to $3.37 billion. The earlier guidance was $3.4 to $3.7 billion. The company sees earnings at 56 cents to 60 cents, compared with earlier guidance of $55 cents to 65 cents.

Jobless claims and concern for safety weigh on markets
The market was weighed down initially by a small increase in initial jobless claims and a rising dollar as investors continued to look for safety in an uncertain global economy.

As a result, utilities were the best-performing sector of the S&P 500, and the Dow Jones Utilities Average ($UTIL) was flat on the day at 429. After utilities came consumer staples, including Kraft (KFT), Coca-Cola (K), Procter & Gamble (PG) and Wal-Mart Stores (WMT).

Financial stocks were the laggards, again. JPMorgan Chase (JPM) and Bank of America (BAC) were down 3.8% to $33.51 and 3.7% to $7.20, respectively. Only one stock in the Philadelphia KBW Bank Index was higher, US Bancorp (USB), up 0.8% to $22.86.

European stocks, meanwhile, were higher after the European Central Bank left interest rates alone and conceded growth in the eurozone is stumbling. Goldman Sachs chief economist Jan Hatzius said the chances of a new U.S. recession are "one in three."

Gold, meanwhile, settled up 39.90 to $1,857.50 an ounce in New York. Silver had risen 89.9 cents to $42.53 an ounce. Crude oil (-CL) settled down 16 cents to $89.05 a barrel. The rising dollar pushed interest rates lower. The 10-year Treasury yield closed at 1.986%, down from Wednesday's 2.003%.

Energy prices -- New York close
			Thur.			Wed.			Month chg.			YTD chg.
Crude oil (-CL)			$89.05			$89.34			0.27%			-2.55%
(per barrel)
Heating oil (-HO)			$3.0443			$3.0756			-1.29%			19.68%
(per gallon)
Natural gas (-NG)			$3.9800			$3.9400			-1.83%			-9.65%
(per mil. BTU)
Unleaded gasoline (-RB)			$2.8852			$2.9080			0.31%			17.61%
(per gallon)
Brent crude			$114.55			$115.80			-0.26%			20.90%
(per barrel)
Retail gasoline			$3.6550			$3.6570			1.05%			18.98%
(per gallon; AAA)

Google buys Zagat; OpenTable slumps
If there was a fun deal, it was Google's (GOOG) acquisition of Zagat, the publisher of restaurant review guides built on customer rankings. The price wasn't disclosed, but Eric Schonfeld, writing on TechCrunch, said the price was probably less than $66 million. A deal worth more than $66 million would automatically prompt an antitrust review.

Tim and Nina Zagat, who founded the company in 1980, had tried to sell the company in 2008 for $200 million but couldn't find a buyer.

Zagat will become a cornerstone of Google's local services, which include listings and maps for restaurants and other small businesses, Google vice president Marisa Mayer wrote on the company's blog.

There was one big loser in the deal: OpenTable (OPEN), an online service that offers reviews and reservations. Its shares were off 8.3% to $57.50. Google was up 0.2% to $534.96.

What will Obama say?
Of the Obama and Bernanke speeches, Obama's is likely to be the more specific. He wants a $300 billion jobs package built on payroll tax cuts and tax credits. The question is whether a Republican-controlle​d Congress will deal with any of it. It may well be that the White House expects a defeat and will use it in the 2012 election campaign.

Bernanke's speech disappointed by its lack of detail about the tools the Fed may use to try to boost the economy. Bernanke would only say the central bank has more tools at its disposal. The Federal Open Market Committee, the Fed's policy-setting body, will discuss these in a two-day meeting that starts Sept. 20.

The most-talked-about tactic is an Operation Twist, whereby the Fed would sell short-term Tresury securities and buy long-term issues to try to keep long-term rates low.

A piece in The Wall Street Journal today appeared to offer some detail of the Fed's thinking. (Registration may be required.)

Critics say a "twist" would be a money loser and may not accomplish anything, because banks would be reluctant to make anything but short-term loans.

The speeches will come after the European Central Bank's decision to leave its base rate at 1.5%. ECB President Jean-Claude Trichet conceded that inflation pressures have lifted and that the eurozone economy is getting worse.

The bank cut its forecast for 2011 growth to 1.4% to 1.8% from 1.5% to 2.3%. But many analysts believe the forecast is wildly optimistic, given the problems facing Greece, Ireland, Portugal, Spain and Italy.

A weak jobless-claims report but a better trade picture
The speeches will come in the context of last week's jobs-and-unemploymen​t report that showed no payroll growth and a national unemployment rate stuck at 9.1%. Thursday's report showed unemployment claims rising to a seasonally adjusted 414,000 from a revised 412,000 claims a week ago.

The filing rate has been stuck above a seasonally adjusted 400,000 for four weeks. The four-week moving average, which offers a clearer picture of the trend, was at 414,750. It has been above 400,000 since the week ending April 16.

The Commerce Department reported that the U.S. trade gap narrowed in July to $44.81 billion. Record-high exports and lower oil prices, which resulted in lower imports, led to the largest decline in the trade deficit in almost 2 1/2 years. Economists had expected the gap to narrow to only $51.5 billion, just slightly lower than $51.57 billion in June.

Cisco, Microsoft lead the Dow
Only five of the 30 Dow stocks finished with gains.

Cisco Systems (CSCO) and Microsoft (MSFT) were the top performers among the 30 Dow stocks, up 2.6% to $16.29 and 0.9% to $26.22, respectively. (Microsoft is the publisher of MSN Money.)

Cisco was upgraded to "buy" from "hold" by brokerage firm Auriga. It has some strong products coming to market that will take market share from competitors Juniper Networks (JNPR) and Hewlett-Packard (HPQ).

Microsoft was rated a buy by analyst Rick Sherlund of Nomura Securities. Investors are badly undervaluing the stock, he wrote. Sherlund had been with Goldman Sachs for many years before trying his hand at hedge funds.

Sherlund also thought HP might be a target for Oracle (ORCL).

But only 67 S&P 500 stocks showed gains. All 10 sectors of the S&P 500 were lower.

Yahoo (YHOO) and Valero Energy (VLO) were the top S&P 500 performers.

Yahoo is now seen as a candidate either to go private or be taken over, after CEO Carol Bartz was sacked on Tuesday. Co-founder Jerry Yang is pushing to take the company private, according to the Business Insider blog.

For her part, Bartz described her board as "doofuses" in an interview with Fortune. And hedge-fund manager Dan Loeb wants a major shakeup of the board. One other issue: Bartz says she won't resign her board seat; a Yahoo statement late today said the board expects her to leave the board.

Meanwhile, Valero CEO William Klesse said the refiner will make at least $2 a share, net of one-time items. Analysts have been expecting $1.45. Valero may bid for Sunoco's refineries, Kless said at a Barclays (BCS) investment conference.

The S&P 500 laggards were Pall (PLL), down 9.8% to $44.03, and newspaper-and-media company Gannett (GCI), down 6.5% to $9.87. Pall, a maker of filters for drugmakers and refineries, reported adjusted fiscal-fourth-quarte​r earnings of 76 cents, compared with a Street estimate of 88 cents.

Meanwhile, only 23 stocks in the Nasdaq-100 ($NDX.X) Index were higher, led by Yahoo, Micron Technology (MU) and Cisco.

Drugmaker Warner Chilcott (WCRX) and First Solar (FSLR), down 4% to $15.29 and 3.9% to $86.67, respectively, were the laggards. First Solar shares have fallen 15% in the aftermath of the collapse of solar-panel maker Solyndra. The company had received more than $500 million in federal loans before seeking bankruptcy protection last week.

Short hits from the markets -- New York close
			Thur.			Wed.			Month chg.			YTD chg.
Treasury yields
13-week Treasury bill			0.0100%			0.020%			0.00%			-91.67%
5-year Treasury note			0.867%			0.908%			-8.93%			-56.99%
10-year Treasury note			1.986%			2.036%			-10.46%			-39.91%
30-year Treasury bond			3.310%			3.354%			-7.85%			-24.12%
Currencies
U.S. Dollar Index			76.352			75.566			2.94%			-3.70%
British pound			1.5967			1.5990			-1.76%			2.32%
(in U.S. $)
U.S. $ in pounds			£0.626			£0.625			1.79%			-2.26%
Euro in dollars			$1.39			$1.41			-3.35%			3.86%
(in U.S. $)
U.S. $ in euros			€ 0.720			€ 0.709			3.47%			-3.72%
U.S. $ in yen			77.64			77.20			1.16%			-4.58%
U.S. $ in Chinese			6.41			6.39			0.08%			-3.17%
yuan
Canada dollar			$1.012			$1.017			-0.99%			0.84%
(in U.S. $)
U.S. dollar			$0.989			$0.984			1.00%			-0.83%
(in Canadian $)
Commodities
Gold (-GC)			$1,857.50			$1,817.60			1.41%			30.68%
(per troy ounce)
Copper (-HG)			$4.144			$4.132			-1.45%			-6.82%
(per pound)
Silver (-SI)			$42.5300			$41.6310			1.82%			37.47%
(per troy ounce)
Wheat (-ZW)			$7.3800			$7.5150			-6.76%			-7.08%
(per bushel)
Corn (-ZC)			$7.3400			7.48			-4.77%			17.91%
(per bushel)
Cotton			$1.1363			1.1034			7.39%			-21.53%
(per pound)
Coffee			$2.8410			2.845			-1.44%			18.13%
(per pound)
Crude oil (-CL)			$89.05			$89.34			0.27%			-2.55%
(per barrel)