Dow off 80; Fed will keep rate rates steady

The central bank sees depressed real estate and supply disruptions from the Japanese earthquake hampering the recovery. But inflationary pressures should ease. Jabil Circuit shares jump on decent earnings. Oil and gold rise.

By Charley Blaine Jun 22, 2011 12:27PM

Charley BlaineUpdated: 8:57 p.m. ET

Stocks fell back in late-day trading after four days of gains as the Federal Reserve said it would not be raising rates any time soon. The central bank said the economy is growing, but not as fast as expected, and job growth has been weak.


The economy has been hurt by supply disruptions resulting from the Japanese earthquake in March. Plus, consumer spending has been constrained by higher food and energy prices. The commercial and residential real-estate markets are weak.
While the Fed sees inflation easing in the coming months, its Federal Open Market Committee sees "exceptionally low" rates for an extended period of time. The FOMC, the Fed's rate-making body, left its federal funds rate at 0% to 0.25%. The fed funds rate is the Fed's target for overnight loans between banks and is the rate on which nearly all U.S. rates are built.


The market was flat ahead of the Fed decision. It moved lower after Fed Chairman Ben Bernanke said the central bank doesn't envision another program of buying in Treasury securities. Also, the Fed released new growth projections showing the central bank sees slower growth for 2011 and 2012.


The Dow Jones industrials ($INDU) closed down 80 points to 12,110. The Standard & Poor's 500 Index ($INX) was down 8 points at 1,287, and the Nasdaq Composite Index ($COMPX) was down 18 points at 2,669. 


Article continues below.

The major averages had rallied for each of the past four sessions, with the Dow up 293 points, or 2.5%, in that time.

Thursday includes the weekly jobless claims report from the Labor Department and the May report on new-home sales from the Commerce Department. In addition, earnings are due from Oracle (ORCL), Conagra (CAG) and Rite Aid (RAD).

Futures trading suggests a weak open for U.S. stocks.


Fed to end QE2

The Fed decision on rates also contained an acknowledgement that QE2 is ending on June 30. QE2 is the moniker for Quantitative Easing, part 2. That's the Fed's program of buying in Treasury securities to help boost the economy. The program started in November, and the New York Federal Reserve Bank said it would be halting its purchases of securities nest week.


The program was controversial from the start. Critics said it would prove inflationary and wouldn't help the economy. As soon as Bernanke floated the idea last summer, stock prices started to move higher and the dollar moved lower. It came as commodity prices moved sharply higher. Whether or not it succeeded is hotly debated. Joblessness is modestly improved at best. The housing market is a mess because of overbuilding and record-high foreclosures.


One piece of the current program will be extended. The Fed will use principal repayments on the securities it owns to buy more Treasury securities.


There was a hint in the Fed's statement today that it might try another buying program. But only if the economy show signs of accelerating weakness.


Energy prices -- New York close



Wed.

Tues.

Month chg.

YTD chg.
Crude oil (-CL)

$95.41

$94.17

-7.10%

4.41%
(per barrel)











Heating oil (-HO)

$2.95

$2.89

-3.21%

16.17%
(per gallon)











Natural gas (-NG)

$4.32

$4.39

-7.48%

-2.00%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.97

$2.88

-5.62%

21.20%
(per gallon)











Brent crude 

$114.21

$110.95

-2.16%

20.54%
(per barrel)











Retail gasoline

$3.63

$3.64

-4.07%

18.03%
(per gallon; AAA)












FedEx cheers Wall Street

FedEx (FDX) shares were up 2.6% to $91.44 after the package shipper forecast full-year earnings that may top analysts’ estimates as global shipping demand climbs. Earnings for the 2012 fiscal year will climb to $6.35 to $6.85 a share, the company said today. The consensus Street estimate is $6.50 a share. Rival United Parcel Service (UPS) was 0.7% higher to $71.11.


Commodity prices were higher, with crude oil (-CL) in New York settling up $1.24 to $95.41 a barrel on a report showing smaller-than-expected domestic oil supplies. AAA's Daily Fuel Gauge Report showed the national average retail price of gasoline at $3.626 a gallon, down from Tuesday's $3.637.


Gold (-GC) settled up $7 to $1,553.40 an ounce on worries about the euro and Greece. Silver (-SI) settled up 36 cents to $36.739 an ounce. Copper moved down slightly to $4.088 a pound.

The dollar was higher against major currencies; the U.S. Dollar Index settled up 0.257 to 75.19. The index measures the greenback against a basket of currencies, with the euro the biggest weight.

Interest rates were mixed. The 10-year Treasury yield finished at 2.993%, up from Tuesday's 2.985%.


Adobe down, Jabil Circuit up
Adobe Systems (ADBE) shares were down 6.3% to $30.01. The stock was the biggest decliner among S&P 500 stocks. The largest maker of graphic-design software said third-quarter profit may be as low as 50 cents a share. The Street has been estimating 54 cents.

Jabil Circuit (JBL) was up up 3.2% to $19.45, third-best among S&P 500 stocks. The maker of printed circuit boards and other products may buy back as much as $200 million of its shares. In addition. Jabil's third-quarter earnings and revenue beat Street estimates.

In the day's big deal, Dentsply International (XRAY) shares were up 1.9% to $38.32. The company agreed to pay $1.8 billion for AstraZeneca's (AZN) Astra Tech unit, a Swedish manufacturer of dental prosthetics and medical devices. With the deal, Dentsply will become the world’s third-biggest maker of teeth implants.

There was an initial public offering that began trading today. Vanguard Health Systems (VHS), up 0.3% to $18.05. The hospital operator controlled by Blackstone Group (BX) sold 25 million shares at $18 each, raising $450 million, in its initial public offering. 


American Express (AXP), up 0.6% to $49.85, and Coca-Cola (KO), up 0.2% to $66.40, were alone among the 30 Dow stocks to show gains today.


Boeing (BA), down 2.5% to $72.12, was the laggard. One reason: American Airlines, the operating arm of AMR (AMR), was reportedly looking at buying at least 100 narrow-body planes from Airbus. The Airbus 320s would replace MD-80s and Boeing 757s.


Airbus is owned by European Aeronautic Defence And Space (EADSY), whose U.S. shares rose 1.2% to $31.60.


In addition, just 26 stocks in the Nasdaq-100 Index ($NDX.X) were higher, led by Warner Chilcott (WCRX) and Vertex Pharmaceuticals (VRTX). The index was down 16 points at 2,236.


Apple (AAPL) was off 0.8% to $322.61, despite news reports that the company plans to introduce a new iPhone in September that boasts a stronger chip for processing data and a more advanced camera. In addition, the index was held back by weakness in Google (GOOG), Oracle, Adobe, Intel (INTC) and Amazon.com (AMZN)


Leaders and laggards
Aerovironment (AVAV), up 20.6% to $34.51, tops among stocks in the Russell 2000 Index (RUT.X). The maker of low-flying drones for U.S. military forces said 2012 earnings will be at least $1.28 a share. Analysts have been projecting $1.23.

CarMax (KMX), up 7% to $32.66, the biggest gainer among S&P 500 stocks. The largest U.S. seller of used cars reported first-quarter revenue of $2.68 billion, beating the Street estimate of $2.53 billion.

Pilgrim’s Pride (PPC), up 15.6% to $5.40. BB&T Capital Markets analyst Heather Jones raised the chicken producer to "buy" from "hold" and set the 12-month share-price estimate at $7.50.

Royal Philips Electronics (PHG) slumped 10.3% to $23.36. The world’s biggest maker of light bulbs said it needs to deepen a cost-cutting program to combat deteriorating demand for lighting and consumer electronics. Cree (CREE), a maker of energy-efficient lighting, slipped 1.3% to $33.56.

Western Refining (WNR), up 10.8% to $17.52. Deutsche Bank raised the refineries operator to “buy” from “hold” and increased the 12-month share-price estimate to $24 from $15, citing renegotiated debt terms. 


Short hits from the markets -- New York close



Wed.

Tues.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.01%

0.03%

-80.00%

-91.67%
5-year Treasury note 

1.54%

1.55%

-8.47%

-23.36%
10-year Treasury note

2.99%

2.99%

-1.87%

-9.44%
30-year Treasury bond

4.22%

4.22%

-0.02%

-3.37%
Currencies











U.S. Dollar Index

75.188

74.931

0.66%

-5.17%
British pound

$1.61

£1.62

-2.38%

3.02%
(in U.S. $)











U.S. $ in pounds

£0.62

£0.62

2.44%

-2.93%
Euro in dollars

$1.44

$1.44

-0.50%

7.34%
(in U.S. $)











U.S. $ in euros

€ 0.70

€ 0.69

0.51%

-6.84%
U.S. $ in yen 

80.52

80.23

-1.37%

-1.05%
U.S. $ in Chinese

6.49

6.46

-0.25%

-1.96%
yuan











Canada dollar

$1.028

$1.029

-0.57%

2.48%
(in U.S. $)











U.S. dollar 

$0.973

$0.973

0.56%

-2.41%
(in Canadian $)











Commodities











Gold (-GC)

$1,553.40

$1,546.40

1.08%

9.29%
(per troy ounce)











Copper (-HG)

$4.088

$4.089

-2.14%

-8.07%
(per pound)











Silver (-SI)

$36.7390

$36.3790

-4.09%

18.75%
(per troy ounce)











Wheat (-ZW)

$6.3825

6.7425

-18.41%

-19.64%
(per bushel)











Corn (-ZC)

$6.7750

7.075

-9.36%

8.84%
(per bushel)











Cotton 

$1.6122

1.5473

1.61%

11.33%
(per pound)











Coffee

$2.4375

2.435

-7.88%

1.35%
(per pound)











Crude oil (-CL)

$95.41

$94.17

-7.10%

4.41%
(per barrel)











86Comments
Jun 22, 2011 2:28PM
avatar

Does anyone else think that possibly a big part of our economic woes might be the price of oil?  That it's quite possible that people can't afford to go out & spend money because all of their money is going back into their fuel tanks just so they can get to work.  I know my business profits have been ransacked by the fuel bill.  I know it's a big reason as to why I can't invest in new equipment or hire additional personal. 

avatar

Pretty much Bernanke is admitting that the US economy is still dead and has been in ICU since the crash by keeping rates at zero.

 

Get ready for twenty years of going down down down like Japan folks.

 

Until manufacturing comes back in a big way to America we are doomed.

 

The government is running huge deficits as nobody is working and paying taxes. And those who are getting income the super rich are not paying any taxes at all.

 

The baby boomers have started to retire in the millions each year now and between them and the jobless and the smart ones will be raiding their 401k pension plans to live on.

 

State and local governments are going to have dump all their pension funds as more and more of their employees leave befopre their benefits are cut. Another reason teh stock market is going to go down down down.

 

Pretty much there is no good news out there.

 

Japan is in a recession and broke

Europe is in a recession and broke trying to bail out other broke economies

Africa well Africa is Africa.

South America -- well the drug lords are the only ones making money.

Australia is in a recession

Middle east is about to explode in all out war. We are going to attack Syria soon which will mean they will attack Israel which means Israel will attack all the Arab states and then things will go into a nuclear war.

China is starving to death due to no crops last year , this year from drought and now floods and their workers are rebelling now.

N. Korea is building more atomic bombs to use on South Korea.

Vietnam is about ready to go to war with China over who owns the South China Sea.

Rest of Aisa is a basket case. India is over crowded and can not feed it's people like China.

Pretty much there is no one out there to buy US T-bills.

 

Doesn't matter if Congress raises the debt ceiling as no one but Bernanke is buying US T-bills.

 

The US has been in default of it's national debt for about five years now.

 

Pretty much the Wall Street bankers are about ready to pull the plug on everyone and bankrupt us all.

 

Have a Great Day Smile

 

Jun 22, 2011 1:44PM
avatar
NO ONE except the hand full of "suckers" who come here and whine because they keep losing all of their money are even paying attention to the FEDS LIES anymore. Wall street is a shell game, PERIOD.!!! Save your breath LIARS, the only ones who believe you are already hooked...the sane and intelligent will NOT drink the koolaid you are offering on a daily basis.!!!
avatar
FED SEES WEAK ECONOMY AND KEEPS LOW INTEREST RATES

.............because those low rates have saved the economy so well for these last 6 or so years!

 

 

I guess this is where I should remind the Fed of the definition of insanity!

Jun 22, 2011 2:02PM
avatar
I watched Frontline yesterday on PBS.  It explained how Maydoff carried out his Ponzi scheme.  I don't see the difference between him and other fund managers or financial geniuses that are still out there.  They are stealing money from everyone's accounts, be it 401K or @#%.
Jun 22, 2011 3:52PM
Jun 22, 2011 5:51PM
avatar
Certain people want to continue to use Greece, the Japan nuclear reactor issue etc. as primary reasons the market is down.  The primary reason is that we have high double digit unemployment here in the USA along with a resistance by consumers to spend money and finally a housing market mess that will be with us for at least another 10 years.  Until we finally acknowledge what the real problems are we will never be able to come up with the solutions.
avatar

Here is a good one..............MSN​ home page questions: DECLARE A WIN IN AFGANISTAN?

 

 

 

What exactly is the prize of a win in afganistan..........​to get to pay for the evolution from 5th century society to a 10th century with our lives and our money?????????

 

Get out ..........yesterday!

Jun 22, 2011 2:18PM
avatar
Great move by Bank of America in acquiring Countrywide !  Bailed out your partner Mozillo and he's made out like a Fat Rat ! DOES NOT MATTER HOW CHEAP YOUR STOCK GET'S.    BANK OF AMERICA YOU ARE A SINKING SHIP AND EVERYONE WITH HALF A BRAIN IS BAILING OUT !  BEFORE YOU GO DOWN !!!!!!!!!!!!!!!!!!!!!!!
avatar
FED logic...........lets not raise interest rates because then big failure prone banks will charge a higher rate  to the little guy that they are purposely not lending to anyway, and with all that basically free money (stealth stimulus @ 1/100th of 1%) we are rewarding them with because of the "job well done" of cashing in at each and every executive position while keeping the planet on the verge of class warfare and absolute bankruptcy!
Jun 22, 2011 4:00PM
avatar
Crooks accelerated the selling even more in the last 5 minutes. Again people, this has nothing to do with news, or the Fed, or Greece; this is simply market manipulators doing their thing, pocketing tons of money and most Americans out there losing tons....Too many of these scumbags on and off the floor, almost impossible to stop them...We were down 20 points at 1530 hrs...Oh well...Cheaters still kings on Wall Street.
Jun 22, 2011 2:27PM
avatar

Was anyone a dumba** enough to think they would?  The US is a veritable financial train wreck and the last thing the FED needs to do is raise interested rates.  Tant amount to poring gasoline on an electrical fire.

 

What they need to do is change their measure of core inflation rates and get a real handle on what is compounding the financial disaster in this country.  Food up 4.9%, Clothing 6.25% petrol products or anything even closely related to petrol up zillion%, medical costs 9.8% higher education 4.9%.  You take these basic necessity items compound them with a REAL unemployment rate of about 21% my estimate and then throw in, for good measure those that are underemployed.......who knows how many and you have one hell of a mess.

 

I did not vote for Mr. Obama but became a supporter later.  However I have begun to wonder if he and his team of financial experts really have a handle on what is happening out here OR if Mr. Obama has in his own mind determined that the cycle of economic change just did not happen on his watch and he has resigned himself to being a one term president?

 

Not that anything that has or is intending on running for the position has anything better to offer or any real idea of what is wrong either.

Jun 22, 2011 4:30PM
avatar
Just read where big ben bernake just spoke on the economy. Does anyone here know how you can tell when he is lying?...his lips are moving...
Jun 22, 2011 5:46PM
avatar
It never ceases to amaze me how MSN/Dispatch and Charley B. write the headlines for the articles.  Today the Dow was down 80 points and he uses the word "off".  Had the market been up 80 points he would say the market "soared", "surged" etc.  Much to biased as to what the reality really is.
Jun 22, 2011 5:10PM
avatar
Another story related to this one told of ending QE2, but the fed is going to "use principal payments on securities it owns to buy more treasuries".  Doesn't look like an end of QE to me.  Bernanke and other Gov't economic policy makers know damn well things are getting more rotten on America's main streets.  Inflation stats are skewed to prevent larger gov't interest payments and rob the savers, reward the irresponsible.  My money is buried in the back yard, better yet I will convert to precious metals....paper currency is fast becoming useless.  When RollObama speaks I change channels, when Bernanke speaks I change channels, distrust of Federal Gov't leadership has ramped to an alarming new level. 
Jun 22, 2011 6:23PM
avatar
What good are low rates when there are no jobs or hope. With no jobs there will be no investing or buying homes. If interest rates are so low "Why is the credit rate so high?".Why are the banks refusing loans? All of this is so the politicians can screw the American citizen.
Jun 22, 2011 2:23PM
avatar
Depressed R/E markets hampering economic growth - hmmm, must be a rocket scientist statement.  Of course it is you fool  -  and if anyone thinks it has bottomed out they are in for a big surprise. 
Jun 22, 2011 3:44PM
avatar
regarding banks getting free money,

What other industry has seen no inflation in their input costs?  If it wasn't for the quest of putting a bank branch on every corner, what would they even have for costs?

Jun 22, 2011 3:53PM
avatar

More of the government trying to control our economy.

 

Was the Fed originally intended just as an emergency back stop for the banks?

 

Because now they try to manage the economy with monetary policy and interest rates.

 

We should probably end the Fed period, but if we allow it to exist, going forward it should be a rarely seen and rarely used emergency usage only bank.   Emergencies would not include corporations about to go under, including major banks.  Let those who fail in the market, fail.

Jun 22, 2011 3:15PM
avatar
Come on, the earthquake is not a factor. 
The US economy had the finished cars it needed and could not sell enough.  The US had the shelves stocked in the stores of all of the electronics and could not sell enough. The US had homes for sale and could not sell enough.  The US had available bodies to employ but did not need them.
March, April, and May were what they were on the merits of the economy that preceded it the past years.
The market is only an indicator of were investments are being stored on any given day; stocks, commodities, currencies, etc.
Right now it is a tough economy.  Choose wisely.

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