Fed keeps rates alone; stocks drift lower

Updated: 6:30 p.m. ET

Stocks fell modestly today even after the Federal Reserve said it still expects to maintain low interest rates at least into 2015. The central bank also said it will continue to buy in billions of dollars of securities each month to boost the economy.

Wall Street expected the move. The stock market's decline was due to continuing concerns about global and domestic growth and earnings worries. The effect of today's move will be to keep U.S. interest rates low for the foreseeable future. Perhaps chief among the rates for now: mortgage rates. Bankrate.com said the rate on a 30-year mortgage averaged 3.46% today.

After the close, shares of game-maker Zynga (ZNGA) jumped sharply. The company reported break-even earnings but also announced a $200 million stock buyback. Software company Symantec (SYMC) also rallied strongly as earnings beat estimates.

The market's late-day decline came after stocks were slammed Tuesday, with the Dow Jones Industrial Average ($INDU) suffering its worst one-day loss since June. Facebook's  (FB) results late Tuesday cheered investors. So did earnings and guidance from Panera Bread (PNRA) and Boeing (BA). But Netflix (NFLX) slumped from weak guidance. Energy stocks struggled as oil and natural gas prices have moved lower.
 
The Dow closed down 25 points to 13,077. The Standard & Poor's 500 Index ($INX) dropped 4 points to 1,409. The Nasdaq Composite Index ($COMPX) had fallen 9 points to 2,982 while the Nasdaq-100 Index ($NDX) was down 10 points to 2,656.

Article continues below.Apple (AAPL), the biggest influence on the Nasdaq-100, was up $3.47 to $616.83. The company introduced its iPad Mini tablet on Tuesday and reports fiscal-fourth-quarte​r earnings after Thursday's close.

Amazon.com (AMZN), which also reports after Thursday's close, fell $5.82 to $228.49 after Barclay's downgraded the shares citing revenue worries.

Apple is off 7.5% this month; Amazon.com is off 10.2%.

The indexes are looking at their first declines for an October in two years and the first monthly decline after four straight gains.

In addition to the Apple and Amazon.com earnings, Revlon (REV), ConocoPhillips (COP), futures-exchange operator CME Group (CME) and candy-maker Hershey (HSY) are among companies reporting earnings.

The government reports on weekly jobless claims, and the National Association of Realtors reports on pending home sales.

Futures trading suggest a modestly higher open.

The Dow and S&P 500 are off around 3.9% since peaking in mid-September; the Nasdaq is off 6.4% as investors have worried about slowdowns around the world and at home.

The declines are noticeable but not huge. If you want huge, just look at what happened in the same time frame in 2008: The Dow fell nearly 27%.

Moreover, the relative strength indexes for the Dow, S&P 500 and Nasdaq are now under 30, suggesting all are oversold. Perhaps little will happen before the election, but the forces to set off a rally are building.

Crude oil falls to July levels
Crude oil (-CL) in New York settled at $85.73 a barrel, down 94 cents from Tuesday and the  lowest settlement since July 10. Brent crude was down 35 cents to $107.90 a barrel.

The national average retail price of gasoline was $3.625 a gallon today, according to AAA's Daily Fuel Gauge Report. That's down from Tuesday's $3.648 and down 4.3% this month.

Gold (-GC) was down $7.80 to $1,701.60 an ounce. Gold is down 4.1% this month.

The 10-year Treasury yield rose slightly to 1.775% from Tuesday's 1.764%.

Energy prices -- New York close (updated)
			Wed.			Tues.			Month chg.			YTD chg.
Crude oil (-CL)			$85.73			$86.67			-7.01%			-13.26%
(per barrel)
Heating oil (-HO)			$3.0264			$3.0308			-4.20%			3.85%
(per gallon)
Natural gas (-NG)			$3.4500			$3.5350			3.92%			15.42%
(per mil. BTU)
Unleaded gasoline (-RB)			$2.5913			$2.5911			-11.26%			2.49%
(per gallon)
Brent crude			$107.85			$108.25			-2.08%			0.44%
(per barrel)
Retail gasoline			$3.6250			$3.6480			-4.28%			10.65%
(per gallon; AAA)

A more activist Fed
The Federal Open Market Committee, the Fed's policy-making body, vowed in September to keep rates low until what it achieved what it saw as sustained job growth.

The stock market hit those 2012 highs within a few days of that meeting.

The Fed's statement said the economy has continued to expand at "a moderate pace." It noted that housing spending has picked up "a bit," but business investment has slowed. It conceded inflation was up slightly, mostly to due to rising oil prices. Crude oil in New York peaked at $99 a barrel on Sept. 14. Brent crude peaked at 116.66 a barrel the same day.

At the same time, however, housing has just started to show signs of recovery. New-home sales in September hit their highest levels since the spring of 2010, the Commerce Department said today. Consumer spending has picked up some steam, the statement said.

The Fed has assumed a more activist role in trying to turn what has been a mediocre recovery into something substantial. That's because the Obama administration and Congress can't agree on a fiscal strategy to move the economy to a higher level.

In addition, there are big concerns that U.S. manufacturing is slowing down and that problems in Europe and Asia are affecting business at home. The third-quarter earnings season has disappointed many investors. Many companies have missed revenue estimates and offered weak guidance for the coming months.

The statement did not shed light on how deep the divisions are in the FOMC. Only Jeffrey Lacker, the president of the Richmond Federal Reserve Bank, dissented. He has opposed the Fed's buying $40 billion in mortgage securities and reinvestment of $45 million from maturing securities. He also thinks the Fed should put no deadline on how long it will keep rates low.

Facebook's big gain
Facebook surged $3.73 to $23.23 -- and reached as high as $24.25 -- after the social networking company grew mobile advertising revenue several times in the third quarter, a much quicker pace than expected.

Besides posting quarterly results that inched past Wall Street's expectations, the company said it generated nearly $153 million in revenue from mobile advertising.

That cheered investors, who have wondered if anyone can make money from ads sent to smartphones.

Panera sees a decent 2013
Panera Bread shares were up $8.09 to $168.43. The restaurant company's third-quarter results beat Street estimates. It also guided higher for 2013.

Panera's report contrasted with other high-growth chains like Chipotle Mexican Grill (CMG) and Buffalo Wild Wings (BWLD), which disappointed investors with their recent results.

Chipotle fell 15% after it reported disappointing earnings last week. It was up $6.58 to $242.82 today. Buffalo Wild Wings was off $8.76 to $74.70 after it said higher costs will trim earnings.

Netflix struggles with streaming subscriptions
Netflix shares fell $8.10 to $60.12 after the DVD-rental and video-streaming company lowered its forecast for streaming subscribers for the year. It's the worst performer among S&P 500 and Nasdaq-100 stocks.

Along with its latest quarterly results, released late Tuesday, Netflix said it now expects to end the year with between 26.4 million and 27.1 million streaming subscribers. That would give the company a gain of 4.7 million to 5.4 million subscribers this year. Netflix had earlier forecast a gain of 7 million subscribers.

Countrywide rears its head again for Bank of America
The federal government filed a civil lawsuit against Bank of America (BAC), alleging the banking giant's Countrywide subsidiary saddled taxpayers with losses by misrepresenting the quality of home loans it sold to mortgage-finance companies Fannie Mae (FNMA) and Freddie Mac (FMCC). The suit says Countrywide engaged in "brazen fraud."

The action, filed today in New York City, seeks at least $1 billion in damages. The filing represents a novel effort by the government to defray costs tied to the 2008 bailout of Fannie and Freddie, and potentially opens a new front against a banking industry already dealing with hefty legal costs.

The government alleges Countrywide Financial, the mortgage company Bank of America acquired in 2008, dismembered quality control and checks on loan quality in 2007 through 2009, in a process called "the Hustle" that aimed to boost the speed at which it originated and sold loans to the companies. The mortgage unit falsely continued to claim the loans qualified for insurance from Fannie Mae and Freddie Mac, the complaint alleges.

Bank of America shares closed down 5 cents to $9.31. Bank officials have conceded that they wished they hadn't taken Countrywide over. The deal has resulted in endless litigation costs relating to the housing bust.

Boeing boosts its outlook
Boeing started the day strongly, but shares fell 11 cents to $72.71. The commercial jet and defense giant reported better-than-expected​ earnings and raised its full-year 2012 outlook. The shares had reached as high as $75. The outlook bucked a recent trend by companies with large global footprints cutting their full-year forecasts. These include DuPont (DD), United Technologies (UTX) and 3M (MMM).

AT&T (T) posted third-quarter revenue that was below analysts' expectations, but its earnings increased from a year earlier. Shares lost 29 cents to $34.71.

The Dow Jones Transportation Average ($DJT) was down 103 points to 5,005 after Norfolk Southern (NSC) said quarterly profit fell on lower shipments of coal and merchandise. Its shares slumped $4.92 to $61.09. Shares of C.H. Robinson Worldwide (CHRW), another component in the transportation index, fell $3.43 to $57.55.

Short hits from the markets -- New York close
			Wed.			Tues.			Month chg.			YTD chg.
Treasury yields
13-week Treasury bill			0.1100%			0.090%			22.22%			1000.00%
5-year Treasury note			0.748%			0.758%			18.73%			-9.88%
10-year Treasury note			1.775%			1.764%			8.43%			-5.13%
30-year Treasury bond			2.933%			2.916%			-3.27%			1.52%
Currencies
U.S. Dollar Index			80.015			80.080			-0.01%			-0.63%
British pound			1.6038			1.5959			-0.75%			3.22%
(in U.S. $)
U.S. $ in pounds			£0.623			£0.627			0.76%			-3.12%
Euro in dollars			$1.30			$1.30			0.86%			0.05%
(in U.S. $)
U.S. $ in euros			€ 0.771			€ 0.770			-0.85%			-0.05%
U.S. $ in yen			80.00			79.87			2.60%			3.76%
U.S. $ in Chinese			6.27			6.25			-0.20%			-0.90%
yuan
Canada dollar			$1.009			$1.008			-0.77%			2.83%
(in U.S. $)
U.S. dollar			$0.992			$0.992			0.88%			-2.73%
(in Canadian $)
Commodities
Gold (-GC)			$1,701.60			$1,709.400			-4.08%			8.60%
(per troy ounce)
Copper (-HG)			$3.568			$3.570			-5.06%			3.84%
(per pound)
Silver (-SI)			$31.6200			$31.793			-8.55%			13.27%
(per troy ounce)
Wheat (-ZW)			$8.8400			$8.688			-2.05%			35.43%
(per bushel)
Corn (-ZC)			$7.5450			$7.560			-0.23%			16.71%
(per bushel)
Cotton			$0.7267			$0.743			2.86%			-20.74%
(per pound)
Coffee			$1.5980			$1.609			-7.90%			-30.42%
(per pound)
Crude oil (-CL)			$85.73			$86.670			-7.01%			-13.26%
(per barrel)