Wall St.: Shaky before BernankeMajor gauges struggle as investors gear up for Fed chairman's speech on Friday.NEW YORK (CNNMoney.com) -- Stocks struggled Thursday as investors mulled strong economic growth in the second quarter and more problems in the credit market, ahead of a key speech from Federal Reserve chairman Ben Bernanke, expected Friday. The Dow Jones industrial average (down 50.56 to 13,238.73, Charts) and the broader S&P 500 (down 6.12 to 1,457.64, Charts) index both fell around 0.4 percent. 
The Nasdaq Composite (up 2.14 to 2,565.30, Charts) ended just above unchanged. Treasury prices rose, lowering the corresponding yields. The dollar was mixed versus other major currencies. Oil and gold prices both slipped. After the close, Dell (Charts, Fortune 500) reported quarterly earnings and revenue that rose from a year ago and topped forecasts. Shares were little changed after the close. In addition to Bernanke's speech, Friday brings reports on personal income and spending, factory orders, consumer sentiment and manufacturing in the Chicago-area. Stocks slumped at the open, turned higher near midday and then seesawed through the afternoon, in tune with the recent volatility that has kept investors on edge this summer. That volatility isn't likely to disappear anytime soon, said Todd Salamone, director of trading at Schaeffer's Investment Research. "The wild card here is the Fed, with the market basically begging for a rate cut, and the Fed still on hold," Salamone said. Fed chair Bernanke is due to speak Friday at an economic symposium in Jackson Hole, Wyoming and stock investors are hoping he'll stress that the central bank is prepared to step in should markets deteriorate further. Bernanke essentially said that in a letter to Senator Charles Schumer, released Wednesday. That letter, in conjunction with a big drop in the yen, sparked a big stock rally Wednesday, with the Dow gaining 250 points. However, stocks tanked Tuesday, after investors reacted to the outdated minutes from the Aug. 7 Fed policy meeting, in which the bankers did not seem to indicate that they were overly concerned about the threat to financial markets from the credit and mortgage market turmoil. The sharp stock reactions demonstrate the tumultuous nature of the stock market right now, the impact from hedge funds and program trading, but also how Fed-focused investors seem to be at the moment. The Fed has been injecting billions into the banking system over the last few weeks - including $5 billion of temporary reserves on Thursday. The bank also cut the discount rate - which affects bank loans. Now investors are looking for signs that the bank will also cut the fed funds rate, which affects consumer loans. Yet, recent reports have questioned whether the Fed will cut rates. Investors on Thursday also took in the revision of second-quarter gross domestic product growth (GDP). GDP grew at a 4.0 percent annual rate, revised up from an initial reading of 3.4 percent. Economists surveyed by Briefing.com thought it would rise to a 4.1 percent annual rate. The strength of the report suggested that the economy is holding up despite the ongoing problems in the housing market. While that's a positive for the economy, it's perhaps a negative for stock investors looking for signs that the Fed will have to cut interest rates at the Sept. 18 policy meeting. The central bank has suggested that it will use the discount rate, and inject cash into the banking system to handle financial market turmoil, but that the fed funds rate will be determined by the economy. If the economy is holding up well, despite the housing market woes, that would seem to be an argument against cutting interest rates. A separate report showed a surprise rise in weekly jobless claims, the government said. In other news, reports that possible chemical weapons were found at a U.N. building briefly sent stocks to session lows. However, it was determined that the vials believed to contain chemical gas were samples from an old file, were meant to have been destroyed, and did not pose an immediate threat. In corporate news, H&R Block (up $0.34 to $19.84, Charts, Fortune 500) reported steep first-quarter losses, while Freddie Mac (down $3.18 to $60.07, Charts, Fortune 500) saw a big drop in earnings. Lehman Brothers cut earnings estimates on a number of banks, Briefing.com reported, just two days after Merrill Lynch had downgraded a number of banks, reflecting concerns about how the credit and mortgage market problems will impact financial sector earnings. The companies mentioned in the Lehman note were Goldman Sachs (down $2.34 to $171.38, Charts, Fortune 500), Bear Stearns (down $0.40 to $106.70, Charts, Fortune 500), Merrill Lynch (down $0.93 to $72.18, Charts, Fortune 500) and Morgan Stanley (down $1.05 to $60.16, Charts, Fortune 500). The credit crunch has also raised concerns about how the recent flood of corporate deals might be effected. To that effect, it was reported that private equity firm KKR is in talks with a number of big Wall Street banks regarding the $24 billion it requires to complete its deal to buy First Data (up $0.17 to $32.90, Charts, Fortune 500). Earlier in the week, Home Depot (up $0.49 to $37.04, Charts, Fortune 500) had to lower the price of its supply business so as to complete that deal, reflecting the tighter credit market. Wal-Mart Stores (down $0.87 to $43.32, Charts, Fortune 500) slipped Thursday on a Merrill Lynch downgrade, Briefing.com reported. It was the Dow's biggest decliner. On the upside, a number of large technology shares managed gains, including Apple (up $2.17 to $136.25, Charts, Fortune 500), Dell (up $0.60 to $28.46, Charts, Fortune 500) and Cisco Systems (up $0.43 to $31.43, Charts, Fortune 500). Among other stock movers, Sigma Designs (up $4.07 to $42.70, Charts) jumped in unusually active Nasdaq trade after the chipmaker reported higher quarterly sales and revenue that topped estimates. Market breadth was negative. On the New York Stock Exchange, losers beat winners by more than 9 to 7 on volume of 1.28 billion shares. On the Nasdaq, decliners beat advancers by 4 to 3 on volume of 1.85 billion shares. Treasury prices rose, lowering the yield on the 10-year note to 4.50 percent from 4.56 percent late Wednesday. Bond prices and yields move in opposite directions. In currency trading, the dollar fell versus the yen after posting its biggest one-day percentage gain against the Japanese currency on Wednesday. However, with bets that risk has returned to the market, the greenback slipped again. The dollar rose versus the euro. U.S. light crude oil for October delivery fell 15 cents to settle at $73.36 a barrel on the New York Mercantile Exchange. COMEX gold for December delivery fell $1.50 to settle at $673.90 an ounce. |
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