WallStreet falls on recovery fears
The S&P 500 and Nasdaq ended slightly lower yesterday and the Dow was flat, reversing earlier gains, after comments by Federal Reserve Chairman Ben Bernanke sparked jitters about the economic recovery.
Financial and technology shares were among the biggest drags on the market. The S&P lost 1.6 per cent while the KBW Bank Index shed 2.1 per cent.
Speaking at the Economic Club of Washington, Bernanke said inflation could remain subdued, but the US unemployment rate could remain elevated for some time.
Initially the Fed chief’s remarks lifted stocks and sent the dollar lower, but later some investors pared positions. Bernanke said the US economy faces “formidable headwinds,” including a weak labour market and tight credit conditions that have persisted despite the Fed’s efforts to support the economy.
“Obviously there was an initial boost, but as people looked more into it, they realized … we do face ‘formidable headwinds,’” said Tim Speiss, partner at Eisner LLC.
The Dow Jones industrial average ended up 1.21 points, or 0.01 per cent, at 10,390.11. The Standard & Poor’s 500 Index lost 2.73 points, or 0.25 per cent, at 1,103.25. The Nasdaq Composite Index fell 4.74 points, or 0.22 per cent, at 2,189.61.
Investors had been looking for a clue as to how the Fed might unwind its economic stimulus efforts after a report on Friday showed employers cut far fewer jobs than expected in November were reassured.
Bank of America closed down 2.4 per cent at $15.89 and JPMorgan Chase fell 1.2 per cent to $41.25.
Citigroup shares ended down 2.2 per cent to $4.03 on news that it is in a disagreement with the US government over how much money the bank should raise to exit the Troubled Asset Relief Program. Negotiations between the bank and the government may not be finished for weeks or months, according to people briefed on the matter.
“(In financials) there are still a lot of questions as to how TARP recipient banks are going to pay back, the issue with compensation, lots of things to point to,” said Angel Mata, managing director of listed equity trading at Stifel Nicolaus Capital Markets.
Volume was light on the New York Stock Exchange, with 1.06bn shares changing hands, below last year’s estimated daily average of 1.49bn, while on the Nasdaq, about 1.89bn shares traded, also below last year’s daily average of 2.28bn. Advancing stocks outnumbered declining ones on the NYSE by a ratio of 16 to 13.