Wall St falls after dour Bernanke view
FEDERAL Reserve Chairman Ben Bernanke’s dour assessment of America’s recovery hit US stocks yesterday, as the Fed chief’s comment on “unusually uncertain” economic prospects discouraged investors.
Stocks sank after Bernanke acknowledged the labour market’s continued weakness while offering few specific options to stimulate lending and investment.
“The market sold off because unfortunately there is no remedy provided in Bernanke’s commentary to the rising threat of deflation, the excess capacity in the economy and the malfunctioning of the credit system,” said Joe Battipaglia, market strategist at Stifel Nicolaus in Yardley, Pennsylvania.
“We are now giving up on the notion of a standard recovery in the US economy.”
The Dow Jones industrial average lost 109.51 points, or 1.07 per cent, to 10,120.45. The Standard & Poor’s 500 Index fell 13.91 points, or 1.28 per cent, to 1,069.57. The Nasdaq Composite Index dropped 35.16 points, or 1.58 per cent, to 2,187.33.
Bernanke spoke to the Senate Banking Committee in the first of two days of semiannual testimony to Congress.
The downbeat remarks sapped most of the buying interest even after a spate of strong earnings reports prior to the market’s open. Morgan Stanley was one of the day’s few big winners after it reported stronger-than-expected profit, lifted by new business. Its stock shot up six per cent to $26.80.
Apple rose 0.9 per cent to $254.24 after it posted robust quarterly results, but the company’s conservative margin forecast limited gains.
The benchmark S&P 500 found support at its 14-day moving average and held above 1,060, a level seen as critical by some technical analysts.
Investors have been reluctant to make big commitments in equities due to growing worry about the economic outlook, sparked by disappointing economic data.
“Considering everything the [Fed has] done already, it will be alarming when the time comes that they feel they need to do more,” said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.