Stocks struggle as Fed will wait to make move

The major averages slide lower after the Federal Reserve promises more stimulus only if the economy sags more. The European Central Bank meets Thursday to deal with Europe's woes. US manufacturing dips. Auto sales are solid. Facebook falls below $21.

By Charley Blaine Aug 1, 2012 12:35PM
Charley BlaineUpdated: 9:23 p.m. ET

The Federal Reserve declined today to get more aggressive on the economy, disappointing many traders around the world. At least for now.

Stocks were higher before the Fed announcement and meandered afterward before closing in the red. The Dow Jones industrials ($INDU) closed below 13,000 for the first time since July 26.

The Federal Open Market Committee, the Fed's policy-making body, left its key interest rates unchanged. The Fed said rates would remain low until at least the end of 2014. What traders wanted was action. Since short-term rates already are near zero, action would mean a big new round purchases of Treasury securities to ensure that long-term interest rates will remain low and help a budding housing recovery gain strength.
 
But the Fed said it was monitoring the economy closely and "will provide additional accommodation as needed" to strengthen the economic recovery. The Fed did concede that economic activity "decelerated somewhat" over the first half of the year. Job growth is frustratingly low. Moreover, the Fed remains deeply concerned about economic conditions in Europe.

The major averages all suffered their third losses in a row. The Dow closed down 38 points to 12,971, its lowest close in four sessions. The Standard & Poor's 500 Index ($INX) was down 4 points to 1,375. The Nasdaq Composite Index ($COMPX) was off 19 points to 2,920.

Article continues below.
The Nasdaq's loss largely reflected weakness in small- and mid-capitalization stocks.

The Nasdaq-100 Index ($NDX), which tracks the largest Nasdaq stocks, was off 7 points to 2,635, despite gains in Comcast (CMCSA) and Electronic Arts (EA). Apple (AAPL), the biggest influence on the index, was off $3.95 to $606.81.

The Dow's loss was originally reported as 32.55 points but was revised some time after the close.

The Fed decision came after a mediocre report on U.S. manufacturing. But the ADP National Employment Report, a measure of private-sector job growth, suggested employers added 163,000 jobs in July, better than expected. Sales for Ford Motor (F) and General Motors (GMslipped in July because of smaller sales to car-rental companies. Chrysler Group reported a  13% sales again.

Non-U.S.–based companies had stronger sales. Industry sales ran at an annualized rate of 14.09 million units, up 13.6% from a year ago.

Crude oil (-CL) in New York settled up 85 cents to $88.91 a barrel after the Energy Department reported lower-than-expected domestic oil supplies.

Gold
(-GC) settled down $7.30 to $1,608.50 an ounce. Silver (-SI) dropped 37.9 cents to $27.535 an ounce. Copper (-HG) fell 4.25 cents to $3.375 a pound. Corn (-ZC) and wheat (-ZW) were lower.

The dollar was higher against the euro, but the 10-year Treasury yield hit 1.539%, up from Tuesday's 1.492%.

In addition to the European Central Bank policy announcement, the market will deal with monthly reports on factory orders and mass layoffs from Challenger Gray Christmas, plus the weekly Labor Department report on jobless claims.

General Motors (GM), Kellogg (K), Apache (APA), Cigna (CI)  and Clorox (CL) are among companies reporting earnings.

Energy prices -- New York close



Wed.

Tues.

Month chg.

YTD chg.
Crude oil (-CL)

$88.91

$88.06

4.65%

-10.04%
(per barrel)











Heating oil (-HO)

$2.8588

$2.8480

5.49%

-1.90%
(per gallon)











Natural gas (-NG)

$3.1710

$3.2090

12.29%

6.09%
(per mil. BTU)











Unleaded gasoline (-RB)

$2.8342

$2.7743

7.69%

6.65%
(per gallon)











Brent crude 

$105.66

$104.92

8.04%

-1.60%
(per barrel)











Retail gasoline

$3.5210

$3.5000

5.51%

7.48%
(per gallon; AAA)












So, when will the Fed stop waiting and make a move?
While the Fed stood pat today, its phrase "will provide additional accommodation" was stronger language than it used in June when the FOMC said it was "prepared to take further action."

The Fed could well start another bond-buying program if the jobs reports due Friday and Sept. 5 show a sharp deterioration in domestic labor markets. The FOMC meets  Sept. 12-13. But Chairman Ben Bernanke may signal the Fed's intentions at its annual retreat in Jackson Hole, Wyo., at the end of August.

If Friday's jobs report is awful, it could move faster than anyone thinks.

 

Today's Fed decision puts the focus on the European Central Bank, whose governing board meets Thursday, with the policy announcement due at 7:45 a.m. ET.


The market will watch closely to see if ECB President Mario Draghi has the capacity to do more to support the struggling economies of Spain, Italy and Greece. Draghi had promised last week to "do whatever it takes" to save the euro.

 

Draghi's remarks, made in London, set off stock rallies around the world as traders bet that the ECB would do more to support Spanish and Italian bonds. Germany has resisted big moves that could effectively make Europe's strongest economic power forced to prop its poorer relations elsewhere.

Green Mountain Coffee shares jump on buyback plans
After the close, shares of Green Mountain Coffee Roasters (GMCR) jumped 12.8% to $20.20. The company reported a 30% gain in fiscal-third-quarter earnings and announced plans to buy back shares.

The quarterly results demonstrate the company's strength, CEO Lawrence Blanford said late today, but the company's sales growth would moderate from the hyper-growth it had shown over the past few years.

The company expects to earn 45 to 50 cents a share on an adjusted basis for its fourth quarter on revenue of $889.9 million to $925.5 million. Analysts polled by FactSet had forecast earnings of 61 cents on revenue of $952.2 million for the quarter.

Travelers, Chevron lead the Dow
Energy, health care and materials stocks were the market leaders. Utilities were the laggards.

The Dow was led by Travelers Companies (TRV) and Chevron (CVX), but only 13 of the 30 stocks were higher.

Frontier Communications (FTR), real-estate broker CBRE Group (CBG) and insurance giant Allstate (ALL) led the S&P 500, but only 99 S&P 500 stocks were higher on the day. All were higher because of decent quarterly earnings.

Thirty-two Nasdaq-100 shares were higher. While Electronic Arts and Comcast were the leaders, BMC Software (BMC) and Citrix Systems (CTXS) were the laggards.

Facebook (FB) was off 83 cents to $20.88, after falling to a new low of $20.84. The shares are off 44% from their initial public offering price of $38 in mid-May as Wall Street continues to worry about the company's inability to generate revenue from users who mostly access Facebook from mobile devices.

What the Fed may do
The Fed is likely to show that it's ready to act against a weakening U.S. economy but stop short of aggressive measures for now.

Economists say the central bank could well push back its guidance for when it sees the need for an eventual rate hike into 2015 from the current Fed consensus of late-2014, a move that could signal the depth of the central bank's concerns about the economy and hint at new measures ahead.

Wall Street is braced for another round of Fed bond purchases. Reuters said some economists see an off chance that an announcement might come on today. But analysts believe policymakers will wait until at least September, giving them more time to lay out the case for their preferred method for easing policy in speeches between now and then.

Weakness in manufacturing; ADP sees a big job gain.
U.S. manufacturing unexpectedly contracted for the second straight month in July, showing a mainstay of the economy was struggling to improve as global economies weakened.

The Institute for Supply Management’s factory index was 49.8 last month, close to the three-year low of 49.7 reached in June. Fifty marks the dividing line between expansion and contraction, although the index would have to fall below 43 to signal a recession.

The ADP report is closely watched as a signal of what Friday's big jobs report may show. The 163,000 increase in private-sector jobs, however, was larger than expected.

Plus, the report overall has a history of missing what government data may show. The consensus is for the government to show payrolls to increase by about 100,000.

A funky open hits the market
Traders grappled with a wave of orders that roiled the market and prompted exchanges to halt trading in some securities. Initial signs pointed to a rogue trading algorithm, traders said, and the problem appeared to originate in the computer systems of Knight Capital Group (KCG), one of the biggest market makers. Knight conceded a software glitch.

Knight shares lost a third of their value, falling $3.39 to $6.94.

Some 148 stocks were affected, including stocks in nine Dow components. Among big stocks affected were American International Group (AIG), American Express (AXP), Coach (COH), Bank of America (BAC) and Citigroup (C).

Also seeing big price moves were shares of RadioShack (RSH), Quicksilver Resources (KWIK) Magnum Hunter Resources (MHR) and Dole Food (DOLE).

Short hits from the markets -- New York close



Wed.

Tues.

Month chg.

YTD chg.
Treasury yields











13-week Treasury bill

0.0900%

0.100%

-10.00%

800.00%
5-year Treasury note 

0.627%

0.599%

4.67%

-24.46%
10-year Treasury note

1.515%

1.492%

-8.68%

-19.03%
30-year Treasury bond

2.591%

2.577%

-6.23%

-10.31%
Currencies











U.S. Dollar Index

83.178

82.710

1.74%

3.30%
British pound

1.5605

1.5681

-0.62%

0.44%
(in U.S. $)

 








U.S. $ in pounds

£0.641

£0.638

0.63%

-0.44%
Euro in dollars

$1.23

$1.23

-2.52%

-5.03%
(in U.S. $)

 








U.S. $ in euros

€ 0.813

€ 0.813

2.59%

5.30%
U.S. $ in yen 

78.37

78.12

-1.72%

1.65%
U.S. $ in Chinese

6.39

6.36

0.31%

1.04%
yuan











Canada dollar

$0.999

$0.997

1.63%

1.78%
(in U.S. $)

 








U.S. dollar 

$1.002

$1.003

-1.60%

-1.75%
(in Canadian $)

 








Commodities

 

 

 

 
Gold (-GC)

$1,607.30

$1,614.60

0.19%

2.58%
(per troy ounce)

 








Copper (-HG)

$3.375

$3.418

-3.47%

-1.78%
(per pound)

 








Silver (-SI)

$27.5350

$27.9140

-0.28%

-1.36%
(per troy ounce)

 








Wheat (-ZW)

$8.7950

$8.8825

16.14%

34.74%
(per bushel)

 








Corn (-ZC)

$8.0050

$8.053

26.11%

23.82%
(per bushel)

 








Cotton 

$0.7056

0.7134

-1.08%

-23.04%
(per pound)

 








Coffee

$1.7460

1.744

2.28%

-23.97%
(per pound)

 








Crude oil (-CL)

$88.91

$88.06

4.65%

-10.04%
(per barrel)










 

214Comments
Aug 1, 2012 1:05PM
avatar
If our economy is going to come back, Wall Street needs to back off on raising oil prices back up again. All it does is make everything that we need to live higher and higher and the more money that I have to spend on gas and heating oil, the less I have to spend on other things. The Greed Machine needs to take a breather.
Aug 1, 2012 2:11PM
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Facebook is overpriced at 'free' as far as I'm concerned
Aug 1, 2012 2:03PM
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Why has this site & many others become a place for "lonely hearts".  I mean we can land a scientific rover on Mars & control it from Earth by remote control millions of miles away but we can't eliminate this spam nonsense.
Aug 1, 2012 2:26PM
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The announcement has been made............NO NEW STIMULUS!  And, There is still SIGNIFICANT DOWNSIDE RISK TO THE ECONOMY BUT, the feds are out of bullets!
Aug 1, 2012 4:02PM
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Please no more help from Bernanke - quit destroying the value of our money, hiding inflation and by the way, the money doesn't make it into the hands of small businesses that need it.  The banks and stock market is flush enough from your other misguided efforts to help the economy by Qualitative Easing - it hasn't eased anything!  It isn't working and it is going to hurt all of us.  Let obama die on the vine with his own debt issues and the destruction of our capitalist economy, we don't need that and losing our currencies value through your efforts at the same time.   How stupid can you be - Milton Freidman would eat you for lunch!
Aug 1, 2012 2:10PM
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Can you amagine how much tax payer money it takes to keep this crap afloat?
Aug 1, 2012 3:04PM
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I congratulate the Federal Government for not giving in to the Wall Street Bull!!!!!!! Bravo guys for the decision to hold tough.  If W/S wants a stimulus boost then I suggest they either drink more coffee or get the bugs out of their butts and do something themselves. It must be nice to be an organization that has to have their hands held every time they want something. Wall Street needs to get their own houses in order before any other organization or institution has to bow down to their every whim and request! And anyway, why would a person buy or sell stocks just because the Fed Govt. didn't want to give more stimulus?  Seems like a pretty stupid reason!!!!!!
Aug 1, 2012 3:00PM
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No fed action,I think they figured out that printing money in a stag deflation economy won't help.should have figured that out 2 QE ago.
Aug 1, 2012 3:07PM
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I think if the Fed's prints more paper, China will kick the game board over. Ask yourself this, why would you buy a investment that would be worthless in the future? There is your answer. 
Aug 1, 2012 4:06PM
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And while the economy falls ... Obama waits!!

 

Barry .... wake up!   It's not up to the Fed to do your job.

Aug 1, 2012 3:14PM
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How do you lower long term interest rates further.  We already have a ridiculous flat yield curve.  Rates will have to stay low in order for our government to pay the interest due on the $16 + TRILLION DEBT.  Those with savings are doomed to not many options for investing to make any kind of decent rate of return.  I do not believe another round of QE will make any difference.  It will make the dollar worth less - GUARANTEED!

 

We must get our inept Congress (both parties) to do there job as the peope elected them to do and we need a President who does not demonize the privatre sector.  There are way to many issues for American bsinesses to hire people.

 

How can American workers purchase cars in this scenario.  The auto industry is UNION and pays UNION wages.  The majority of the Americna workers do not make Union wages and many are now working for less or part time vs 3-5 years ago.  There is an affordabilty gap.  I for one drive a 20 year old HONDA ACCORD (purchased used in 1998 with 52K miles).  It now has 285K  miles .   It runs great, has good AC and it is dependable transportation.

 

I am hunkered down for a long slow recovery, and if we reelect this person who is clueless about business for another 4 years - you can kiss the middle class goodbye in America.

Aug 1, 2012 4:04PM
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Poor pathetic leeches didn't get any free money from the all mighty today. Looks like it's back to the BS european excuses tomorrow........ 
Aug 1, 2012 2:25PM
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Palestinians do not need a reason to riot. It's in their DNA. They are born with a rock in one hand and a pipe bomb in the other. 
Aug 1, 2012 3:56PM
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Stocks slide on Fed non-action.........................???????????????????????????

Can anyone explain me why the Prince Harry (Bama's puppet) didn't pass a budget in 4 years???

 

And the Stock Market is WAITING FOR THE FED ACTION????????????.........................

WELL....................???

 

Q: what do you say?

A: THIS IS JUST ANOTHER PROOF THAT THE STOCK MARKET IS BEING FED BY A NANY STATE...

Aug 1, 2012 4:22PM
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The stock market can and will find it's real value very soon.  When it does we will find that all the market manipulation which has taken place will have raped everyone's 401k's, IRA's, and pension plans through short term profit taking.  The Dow is currently over valued by at least 6000 points. When they flip the coconut shells, we will discover we've all been duped.  I hope Ben Dover Bernanke has a good hiding place.
Aug 1, 2012 1:05PM
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The BILDERBERG GROUP AND THEIR PUPPET NEEDS TO GO...!!! But it goes deeper go to google and type in the Bilderberg group Chart..They are the puppet masters and can manipulate numbers and figures to misrepresent anything...Growth, GDP, Increase Food, Water, Prices, etc. on everything you consume.....!!! WAKE UP...!!!! They are taking over and will soon control you and enslave you...!!! Look for the collapse to happen soon and the excuse to unify the markets into a global system...!!!!THEY ARE DOING IT RIGHT NOW...!!!! RIGHT UNDER YOUR NOSE....WHILE THEY ARE DISTARCTING YOU WITH CHASING YOUR TAIL ON NEWS AND BOGUS FALSE EVENTS....!!!! THEY ARE CONTROLLING IT ALL...!!! YOU ARE GIVING UP YOUR POWER TO THEM...!! WAKE UP AMERICA...!!!! BOYCOTT THEIR BUSINESSES THEIR MONEY MAKING ENTERPRISES...!!!!
Aug 1, 2012 3:07PM
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Nice comments!  Endeavor has more than one screw loose but we all know that.  Colt, you sound very knowlegeable.  I have a thought that you may see a combination of deflation and inflation and believe that has been happening for some time, now.  And, if China stops lending us money on borowed money on top of borrowed money.... the game is over.  They will not do that as they cannot as they have put themselsves' in a no-win postion, also.  The Fed has nowhere to go other than to print and print.  The IMF must do the same and the "funny money" will flow and then the game is truly over.  We will go into an inflantionary cycle never seen before.  It is coming and sooner than you think. 
Aug 1, 2012 3:27PM
avatar

Part of the problem is that the FED just keeps putting hope out there.  In return these banks and some poeple are make more risky investments in hope of making a big gain if QE3 was to happen. 

It's time the FED just tells everyone that there is no game plan going forward to do a QE3.

Aug 1, 2012 3:36PM
avatar
Scumbags cry like pussies because Benny di not promise more monoply money...Investors are pathetic!
Aug 1, 2012 1:55PM
avatar

Throw Endeavor two bananas one for himself and the other for his hero Obama!

 

 

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