Bernanke and HP woes halt rally in stocks
WALL Street halted its two-day rally yesterday, after Federal Reserve Chairman Ben Bernanke said the central bank lacks tools to cushion the US economy from the impact of the “fiscal cliff.”
The day’s biggest disappointment was Hewlett-Packard shares, which sank to a 10-year low after the computer and printer maker swung to a fourth-quarter loss and announced a $8.8bn charge related to “accounting improprieties.” The stock slid 12 per cent to close at $11.71.
Bernanke, in comments before the Economic Club of New York, said the Fed does not have the ability to offset the damage that would result if politicians fail to strike a deal to prevent a series of mandatory tax increases and spending cuts scheduled to go into effect early next year.
The statement caused a downdraft in the market, though the equity market cut most of its losses before the end of the day.
Stocks had rallied for the last two sessions after Washington politicians sounded an encouraging note that a deal to avoid the US fiscal cliff could be reached. The gains followed two weeks of sharp losses that pushed the S&P 500 down through the 200-day moving average, a key benchmark of the market’s long-term trend.
The S&P ended yesterday near that level, which was 1,382.68.
The Dow Jones industrial average slipped 7.45 points, or 0.06 per cent, to 12,788.51 at the close. But the Standard & Poor’s 500 Index edged up 0.93 of a point, or 0.07 per cent, to finish at 1,387.82.
The Nasdaq Composite Index inched up 0.61 of a point, or 0.02 per cent, to close at 2,916.68.