Stocks trim losses after Fed minutes

Stocks trim losses after Fed minutes
Wednesday, August 22, 2012 - 9:40pm

U.S. stocks trimmed losses Wednesday after minutes from the Federal Reserve's latest meeting showed the central bank was considering measures to stimulate the economy.

The Dow Jones industrial average was down about 20 points, after earlier shedding more than 80 points. The S&P 500 and Nasdaq erased their earlier losses to post modest gains.

A third round of large bond purchases known as quantitative easing -- or QE3 -- is still on the table, according to minutes from the Fed's latest policy meeting. The central bank is also debating a plan to lay out more explicit guidelines for Fed policy going forward.

While the Fed's policy-making committee discussed both options in detail, the minutes show that several members expressed concerns about QE3.

Some fear that buying more Treasuries or mortgage-backed securities could distort the bond market, while others worry that additional purchases could "increase the risks to financial stability or lead to a rise in long-term inflation expectations."

Investors are expecting Fed chief Ben Bernanke's speech at the Jackson Hole, Wyo., symposium next week to be even more revealing. The Fed's next policy making meeting is in September.

Meanwhile, investors also continue to keep an eye on Greece, as Prime Minister Antonis Samaras meets with eurozone officials throughout the week. He is expected to push for a two-year extension of the country's bailout program, which would give the government more time to implement difficult reforms and help get the nation's economy back on track.

Analysts say markets will be looking for any comments out of Samaras' meetings for signs of further stimulus measures.

"We are unlikely to get any firm promises on the extension of deadlines or additional funding," said Elisabeth Afseth, fixed income analyst at Investec. "But it is more likely that we get supporting comments about 'great efforts made, difficult economic conditions', though with a warning more need to be done."

Trading has been muted for the past few weeks, with the stock market falling into the usual summer doldrums. In fact, average daily volumes on the New York Stock Exchange in August have slumped to the lowest levels since September 2007.

Stocks will likely remain in a narrow range through Labor Day as Wall Street remains in vacation mode, said Stephen Carl, head equity trading at Williams Capital Group.

World Markets: European stocks closed in the red. Britain's FTSE 100 fell 1.4%, the DAX in Germany slipped 1% and France's CAC 40 shed 1.5%.

Asian markets closed in the red. The Shanghai Composite lost 0.5%, the Hang Seng in Hong Kong fell 1.1%, and Japan's Nikkei edged lower 0.3%.

Japan's trade deficit in July was wider than expected at ¥517.4 billion ($6.5 billion), as Europe's debt crisis and slower growth in China pressured the country's exports.

Economy: Existing home sales came in at an annual rate of 4.47 million in July, up from June's 4.37 million, according to the National Association of Realtors. The results were below an economists' consensus compiled by

Companies: PC giants Dell and Hewlett-Packard were big laggards. Dell posted earnings that beat expectations, but shares slumped after the company issued a disappointing guidance. Rival HP is on tap to open its books after Wednesday's close.

Shares of Toll Brothers rose after the luxury home builder reported surprisingly strong earnings, signaling further momentum in the U.S. housing market.

Express posted earnings that beating analyst expectations, but net sales fell short of forecasts, sending shares of the apparel retailer down 10%.

Shares of Williams Sonoma surged after the housewares retailer reported better-than-expected second-quarter earnings and raised its forecast for the rest of the year.

American Eagle delivered earnings that were in line with expectations, but the company's forecast for the full year topped Wall Street's forecast, boosting shares.

Currencies and commodities: The dollar gained ground against the euro, but fell versus the British pound and the Japanese yen.

Oil for October delivery rose 15 cents to $96.99 a barrel.

Gold futures for December delivery added $1 to $1,643.90 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury edged higher, pushing the yield down to 1.75% from 1.81% late Tuesday.

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