Market Suffers From Too Much Information
Ben Bernanke is an avowed advocate of a more transparent Federal Reserve, and reactionary, anxious markets are the byproduct. Without the mysterious Alan Greenspan at the helm, the curtain has been pulled back on the Fed to reveal Bernanke as a clear, direct economist who admits he has no crystal ball. And the markets are left adrift at sea with no oars.
"Bernanke has been treating us like adults, but he's finding out we're really a bunch of children," says Ethan Harris, chief economist at Lehman Brothers. "Today will be another case where he probably didn't think he'd be hammering the stock market."
But that indeed was the consequence of Bernanke's inflation-fighting comments Monday at the International Monetary Conference in Washington, D.C.
The Dow Jones Industrial Average tumbled 199 points, or 1.8%, to 11,048.72. Disney (DIS) was the lone Dow component to end with a gain, while the economically sensitive Alcoa (AA) and Caterpillar (CAT) were among the biggest losers.The S&P 500 and Nasdaq Composite fared similarly, shedding 1.8% and 2.2%, respectively. The markets were already weak Monday, but volume and selling activity picked up after Bernanke spoke at 2:00 p.m. EDT. About 2.2 billion shares traded on the Big Board, and 1.8 billion traded over the counter; losing stocks led winners by better than 3-to-1 in both venues. Weighing on the averages were energy stocks such as Valero (VLO), which fell despite rising crude prices, tech stocks such as Advanced Micro Devices (AMD) and rate-sensitive groups such as homebuilders, which are already under pressure after cautious comments from Standard Pacific (SPF).
Unwelcome DevelopmentsBernanke acknowledged moderating economic growth Monday, but his tough words on inflation trumped any mention of a slowdown. Core inflation "has reached a level that, if sustained, would be at or above the upper end of the range that many economists, including myself, would consider consistent with price stability and the promotion of maximum long-run growth," he said. "These are unwelcome developments."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV