Stocks sink on disappointing Federal action
US stocks edged lower yesterday after the Federal Reserve acted to aid the fragile economy with stimulus measures that were in line with market expectations but went no further.
Stocks rallied in recent days in the hope that the US central bank would extend Operation Twist, a bond-buying program designed to lower long-term rates and stimulate growth. But investor hopes of additional Fed action went unfulfilled.
Concerns about weakened demand were highlighted by Dow component Procter & Gamble, which cut growth forecasts early yesterday. Shares of the world’s largest household product maker fell 2.9 per cent to $60.39.
Another disappointing outlook came from Bed Bath & Beyond, which projected a weaker-than-expected profit for the current quarter after markets closed. Its shares fell 10 per cent to $66.25 in extended trading.
Trading was volatile after the Fed announcement about midday. Declines picked up during Fed chairman Ben Bernanke’s afternoon news conference but then were mostly erased. The Nasdaq composite index even ended slightly higher.
The Dow Jones industrial average was down 12.94 points, or 0.10 per cent, at 12,824.39. The S&P’s 500 Index was down 2.29 points, or 0.17 per cent, at 1,355.69. The Nasdaq Composite Index was up 0.69 point, or 0.02 per cent, at 2,930.45.
The benchmark S&P 500 index had risen for four days in a row and accumulated gains of about seven per cent from a five-month low hit earlier in June as many investors anticipated some Fed action to aid the flagging recovery.
While the Fed is “willing to take action if needed, they’re not giving enough detail as the market wants. There’s a disconnect between what markets want and what the Fed is willing to commit to,” said Alec Young, global equity strategist at S&P Equity Research in New York.
Tech stocks were the day’s biggest gainers, rising 0.2 per cent. Jabil Circuit led the sector as expectations rose that it had retained a key mobile phone customer, sending shares 6.8 per cent higher to $20.75.
Wall Street continued to keep a close watch on Europe for any development out of the region with respect to its sovereign debt issues.
Adobe Systems slid 3 per cent to $31.99 after the maker of Photoshop and Acrobat software cut its full-year revenue outlook and warned about weak demand in Europe.
About the same number of stocks traded on the New York Stock Exchange rose as fell on Wednesday while slightly more stocks fell on the Nasdaq than rose.
Volume was light, with about 6.57bn shares traded on the New York Stock Exchange.