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VOL. 36 | NO. 33 | Friday, August 17, 2012
Stocks down; Fed moves seem less like a sure thing
NEW YORK (AP) — Nobody ever said reading the Federal Reserve was easy.
On Wednesday, the Fed appeared to suggest it was closer to taking additional steps to help the U.S. economy. Stocks rallied as a result and finished the day well off their lows.
But the prospect of Fed help seemed much less certain Thursday, and stocks fell. The Dow Jones industrial average was down 116 points at 13,055 just after 2:30 p.m. EDT.
James Bullard, president of the Fed's St. Louis bank, told CNBC that the minutes from the Fed's July 31-Aug. 1 meeting, released Wednesday, were "stale" because the economy had picked up since then.
"He poured some water on the fire of the QE3 talk," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati, referring to market slang for a Fed program of bond-buying to help the economy.
Another Fed regional official, Chicago president Charles Evans, told reporters in Beijing that he supports further action by the Fed, an apparent affirmation of the Fed minutes.
Stocks also fell after the government said claims for unemployment insurance rose last week by 4,000, the second straight increase. The Standard & Poor's 500 index was down 11 points at 1,402. The Nasdaq composite index fell 21 to 3,053.
The price of gold climbed for a second straight day after the Fed minutes. Some investors buy gold to protect against inflation and take advantage of a weaker dollar when they believe the Fed is about to pump money into the economy.
Gold rose $32 an ounce, almost 2 percent, to $1,672.
But there wasn't much else to trade on. That's typical for the August lull, when many traders are on vacation and news is slow.
The big events that could move the market lie ahead — Fed Chairman Ben Bernanke's speech in Wyoming later this month and a German court's ruling next month on whether it can participate in a bailout for other European countries.
What little news there was wasn't encouraging. China, the world's second-largest economy after the United States, reported that manufacturing activity fell to a nine-month low.
"It's just a harsh reminder that the worldwide economy continues to disappoint," Detrick said.
German leaders, on the eve of a critical meeting with their Greek counterparts to discuss Greece's ongoing bailout, showed signs of the strain between the two countries.
Greece has asked for more time to put in place the spending reforms that Germany is requiring, but the German finance minister said Thursday that more time wouldn't solve Greece's problems.
"It's really more of the same," said Mike Gibbs, co-head of the equity advisory group at Raymond James in Memphis, Tenn. "What Europe has done is told us they're going to do something. They haven't really told us what."
In U.S. stocks, Big Lots fared worse than any other on the S&P 500. It fell more than 22 percent, losing $8.58 to $30.26, after reporting a sharp drop in its quarterly profit and slashing its forecast for the rest of the year.
Hewlett-Packard lost $1.32, or nearly 7 percent, to $17.89. The world's largest maker of printers and PCs reported weak quarterly results, took a huge charge to write down the value of a recent acquisition and offered a disappointing forecast.