Stocks end volatile session mixed

By Alexandra Twin, senior writer


NEW YORK(CNNMoney.com) -- Stocks ended mixed Wednesday as investors struggled to balance the Federal Reserve's statement, a weak housing market report and a selloff in commodity prices amid the stronger euro.

The Dow Jones industrial average (INDU) added a few points. The S&P 500 (SPX) lost 3 points, or 0.3%, and the Nasdaq (COMP) composite dropped 7 points, or 0.3%.

Quiz
Think you're smart about deficits?
1. How many years has the federal government registered an annual budget surplus since 1934?
37
12
18
62

The central bank opted to hold the fed funds rate, a key overnight banking rate, steady at historic lows near zero. In its closely-watched statement, the bankers said the economic recovery is proceeding and the labor market is "improving gradually."

But the bankers also cautioned about the weakness in the housing market and the "less supportive" financial conditions as a result of the "development abroad," meaning the European debt crisis.

"The weaker euro is hurting U.S. exports and the European financial turmoil is bound to hamper growth in the U.S.," said Andrew Neale, head of wealth management at Fogel Neale Partners.

Neale said that in light of the weakness in both the U.S. and Europe, it's clear the Federal Reserve is going to keep interest rate policy accommodative for a while.

"The statement suggests they are going to keep interest rates low until at least the end of the year," Neale said.

The euro reversed course Wednesday afternoon, sending already weak oil and gold prices and stocks even lower.

The euro continued to slide Wednesday, keeping Europe's debt dilemma in focus ahead of this weekend's G-20 meeting. Bond prices rose, lowering the corresponding yields. The dollar was mixed. Oil and gold shares tumbled.

Stocks slipped in the morning after the May new home sales report showed a steep drop in activity to the worst level on record. But stocks managed to cut losses in the hour leading up to the Fed announcement.

Housing market hit: New home sales fell 32.7% in May to a seasonally-adjusted annual unit rate of 300,000, the lowest on record, from a revised 446,000 in April.

The report from the Census Bureau was expected to show that sales fell to a 430,000 annual unit rate, according to a consensus of economists surveyed by Briefing.com. The May plunge reflected the expiration of the homebuyer tax credit at the end of April, but also the reality of a still-struggling economy.

"The report was pretty abysmal," said Joshua Shapiro, chief U.S. economist at Maria Fiorini Ramirez Inc. "It shows you the degree to which the government was supporting the market and now that the tax credit has expired, there's a big air pocket."

Underlying demand is probably stronger than the headline number, he said, which reflects the fact that buyers rushed to get in ahead of the end of the expiration. But the number nonetheless fits into the reality of a slower-growth economy.

Worries that the United States could be headed for a double-dip recession dragged on stocks in May and early June, especially on investor concern over the ongoing European debt crisis and a flailing euro.

On the move: Energy, financial and technology shares declined. Some of the Dow's big losers included Chevron (CVX, Fortune 500), Microsoft (MSFT, Fortune 500) and Exxon Mobil (XOM, Fortune 500).

On the upside, Boeing (BA, Fortune 500), JPMorgan Chase (JPM, Fortune 500), IBM (IBM, Fortune 500) and Merck (MRK, Fortune 500) were among the components managing gains.

Adobe Systems (ADBE) tumbled Wednesday as investors took a "sell the news" approach after it reported higher quarterly sales and earnings late Tuesday that trounced estimates. The software maker also issued a current-quarter forecast that is higher than analysts' most recent estimates.

Market breadth was negative. On the New York Stock Exchange, losers beat winners eight to seven on volume of 1.13 billion shares. On the Nasdaq, decliners topped advancers seven to six on volume of 1.89 billion shares.

Euro: The euro rose 0.3% versus the dollar, erasing early losses and remaining well above its four-year low of $1.188 hit last week. The dollar fell 0.7% versus the yen. The direction of the euro and the state of global debt are expected to be the focus of this weekend's G-20 meeting.

World markets: European markets slipped. Britain's FTSE 100 lost 1.3%, Germany's DAX gave back 1%, and France's CAC 40 fell 1.7%.

Asian markets were mixed. Japan's Nikkei fell 1.9%, Hong Kong's Hang Seng gained 0.2%, and China's Shanghai Composite lost 0.7%.

Commodities: U.S. light crude oil for August delivery fell $1.79 to settle at $76.35 a barrel on the New York Mercantile Exchange.

COMEX gold for August delivery dropped $2.40 to $1,234.80 an ounce after closing at a record $1,258.30 on Friday.

Bonds: Treasury prices rallied, lowering the yield on the 10-year note to 3.11% from 3.17% late Tuesday. Treasury prices and yields move in opposite directions. To top of page

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