Market Ends Dull Day With a Sigh
Updated from 4:20 p.m. EDT
Stocks in New York closed lower Wednesday as a ho-hum session finally succumbed to a retreat after the prior session's tremendous rally.
The
Dow Jones Industrial Average
spent time on both sides of the flat line, swinging in a range of 141 points, but in the end gave back 45.44 points, or 0.4%, to 12,608.92. The
S&P 500
was off 2.65 points, or 0.2%, to 1367.53, and the
Nasdaq
fell 1.35 points, or 0.1%, to 2361.40.
"We seem to be in a range-bound market," said Matt King, chief investment officer with Bell Investment Advisors. "I don't think it's going to head too much higher from where it closed yesterday until we get some evidence of economic growth."
Richard Sparks, senior equities analyst with Schaeffer's Investment Research, called the action a "very normal kind of pullback" amid the upward trend over the past couple of weeks. He also was heartened by how mild the drop was, especially considering the size of Tuesday's surge.
Indeed, despite the downbeat finish, breadth was positive for the day. Around 4.26 billion shares changed hands on the
New York Stock Exchange
, with advancers edging out decliners 5 to 4. Volume totaled 2.05 billion shares on the Nasdaq as winners topped losers 3 to 2.
Of particular interest Wednesday were
comments from Fed Chairman Ben Bernanke
, who conceded that the economy could shrink during the first half of the year.
"It now appears likely that real gross domestic product will not grow much, if at all, over the first half of 2008 and could even contract slightly," he said in prepared remarks to a congressional committee.
Economists have been forecasting a recession -- let alone a mere contraction -- for months. Still, Peter Cardillo, chief market economist with Avalon Partners, called the statement a "major concession." Regarding the Fed's lateness in jumping on the bandwagon, he said, "I think they're hedging. I think they're trying to stay on the fence: 'it could happen, but it may not happen, so let's not scare the markets.'"
Bernanke added that the economy should pick up in the second half, but he warned that the uncertainty attending that prediction is "quite high and the risks remain to the downside." He also cited rising inflationary concerns, which could mitigate any future interest-rate cut decisions.
As for the Fed's role in attempting to save
Bear Stearns
(BSC)
from collapse last month, Bernanke said news that the bank was near bankruptcy "raised difficult questions of public policy," but that, "given the current exceptional pressures on the global economy and financial system, the damage caused by a default by Bear Stearns could have been severe and extremely difficult to contain."
The central bank had hastily arranged funding for the investment bank through
JPMorgan Chase
(JPM) - Get Report
but, due to the severity of Bear's liquidity problems, JPMorgan ultimately agreed to buy it at a massive discount. In his testimony, Bernanke said the arrangement didn't amount to a Fed bailout and that the deal would ultimately benefit the economy and the American public.
Cardillo remarked that Bernanke didn't provide the market with much new information, aside from his suggestion that the Fed might not be cutting interest rates very much, if at all, at its next meeting. "That helps inflation watchers like myself," he said.
Also on Wednesday,
Bloomberg
reported that the International Monetary Fund will predict a 25% chance of global recession while slashing its 2008 global economic growth forecast to 3.7%, down from its January prediction of 4.1%.
On the corporate front, seed producer
Monsanto
(MON)
posted the
surging bottom line
it had predicted last week and reaffirmed its full-year earnings guidance. Still, the low end of that outlook dips just below analyst expectations, and shares finished down 0.8%.
Having a better day was
Best Buy
(BBY) - Get Report
, which
beat analysts' fourth-quarter profit estimates
and said earnings and revenue for fiscal 2009 should at least be in line with forecasts. Shares of Best Buy gained 1.8%.
But
Merill Lynch
(MER)
shed 1.5% after
CNBC
reported that the securities firm is planning on laying off between 10% and 15% of its nonbroker employees next month.
The Wall Street Journal
reported that
National City
(NCC)
is considering selling itself to fellow regional bank
KeyCorp
(KEY) - Get Report
. National City shares surrendered 7.7%, and KeyCorp climbed 3.6%.
Pfizer
(PFE) - Get Report
, meanwhile, announced that it's discontinuing advanced-stage testing on a proposed skin-cancer drug, citing the compound's lack of superiority to standard chemotherapy. The stock ticked up 0.6%.
On the data side, the ADP said its March employment report showed a gain of 8,000 workers last month, easily surpassing the expectation for a 45,000 decline. Also, that partly reversed the upwardly revised loss of 18,000 for February.
Also, the Commerce Department reported that factory orders declined 1.3% in February -- a full percentage-point improvement from the prior month's revised reading, but worse than the 0.8% drop that economists were expecting.
Elsewhere, crude stockpiles for the third week in March were unchanged at 311.8 million barrels, according to the Energy Information Administration.
Commodity prices were climbing. Crude oil added $3.85 to $104.83 a barrel, and gold tacked on $12.40 to $900.20 an ounce.
The moves came even though the dollar dipped 0.2% against the euro to $1.5688. Against the yen, however, the greenback firmed fractionally to 102.37.
Treasury prices were mixed. The 10-year note was down 11/32 in price to yield 3.60%, but the 30-year bond was tacking on 3/32 in price, yielding 4.41%.
Markets abroad lifted on the heels of Tuesday's financials-led rally in the U.S., which had brought the Dow up nearly 400 points. In Asia, Tokyo's Nikkei 225 surged 4% overnight to 13,189, and the Hang Seng in Hong Kong leaped 3.2%. Among European bourses, London's FTSE 100, Germany's Xetra Dax, and the Paris Cac were each up 0.9% or more.