Stocks Close Lower in Light Trading
NEW YORK (
) -- Stocks closed modestly lower Wednesday, as more uncertainty on a debt-rescue plan for Greece and signals that the
Fed
may start to turn more hawkish weighed on the minds of investors.
The
Dow Jones Industrial Average
lost 20 points, or 0.2%, to 10,038. The
fell 2 points, or 0.2%, at 1068 and the
Nasdaq
went lower by 3 points, or 0.1%, at 2148. Trading volume was feeling the chill, as the East Coast was blasted by its second blizzard in two weeks.
Both the Treasury Department's January federal budget release and the Energy Information Administration's weekly inventory data were postponed as a result of the weather.
>>http://www.thestreet.com/story/10678860/1/blizzard-blitzes-markets.html
Chairman
Ben Bernanke
, who had been scheduled to appear before the House Financial Services Committee before it was postponed, released a prepared statement addressing the Fed's exit strategies from economic support policies.
Stocks sold off sharply following the release of the statement, which indicated that the Fed would soon consider raising the discount rate, but remained committed to keeping the target federal funds rate low for an extended period.
"These changes, like the closure of a number of lending facilities earlier this month, should be viewed as further normalization of the Federal Reserve's lending facilities in light of the improving conditions in financial markets," Bernanke wrote. "They are not expected to lead to tighter financial conditions for households and businesses and should not be interpreted as signaling any change in the outlook for monetary policy, which remains about as it was at the time of the January meeting of the Federal Open Market Committee."
Paul Mendelsohn, chief investment strategist at Windham Financial, believes market weakness is a result of the uncertainty regarding whether European countries -- and Germany, in particular -- would come to the aid of debt-laden Greece.
"We're hearing two sides in terms of what's going to happen and we have two big unknowns," he said. "First of all, what are they going to do? How far are the Germans willing to go in terms of assuming Greece's debt? And secondly, is the market going to buy the solution that they come up with? That's really what the market's hung up on and we're not going to be able to do much until we have a better idea of what's going to happen."
Mendelsohn and many market watchers anticipate a plan to be announced Thursday when EU leaders meet in Brussels.
"I just have a hard time believing that Germany will go along with all of this, but they may not have much of a choice," he said.
The uncertainty surrounding the euro strengthened the dollar, which rose against a basket of currencies. The Dollar Index was up by 0.3%.
Meanwhile, crude oil for March delivery settled 77 cents higher at $74.52 a barrel; the most actively traded April
gold contract lost $11 to settle at $1,077.20 an ounce.
Basic materials and energies stocks were among the day's weakest.
DuPont
(DD) - Get Free Report
,
Alcoa
(AA) - Get Free Report
,
Chevron
(CVX) - Get Free Report
and
Exxon Mobil
(XOM) - Get Free Report
were among the Dow's biggest decliners.
Metals and miners like
Freeport-McMoRan Copper & Gold
(FCX) - Get Free Report
,
U.S. Steel
(X) - Get Free Report
and
Coeur d'Alene Mines
(CDE) - Get Free Report
weakened, with shares down by 0.8%, 3.6% and 2.6%, respectively.
Contributing to weakness across metals companies was disappointing guidance and an earnings miss from
ArcelorMittal
(MT) - Get Free Report
. The stock fell of by 7.1%.
The financial sector had best performing shares of the session with
JPMorgan Chase
(JPM) - Get Free Report
and
Bank of America
(BAC) - Get Free Report
as the Dow's top gainers.
Trading was light with the Dow's volume at 178.6 million compared with an average 200.42 million, according to Google Finance.
Earlier, the Commerce Department said the
U.S. trade deficit unexpectedly expanded in December to $40.2 billion. Economists had expected the deficit to narrow to $35.5 billion, from $36.4 billion, previously.
The Mortgage Bankers Association said mortgage application volume dropped 1.2% on a seasonally adjusted basis last week from the week prior, and the refinance index rose 1.4%.
After the close of trading, the market received fourth-quarter earnings news from financial services company
Prudential Financial
(PRU) - Get Free Report
, which missed a consensus earnings target, and interactive software maker
Activision Blizzard
(ATVI) - Get Free Report
, which surpassed them. Activision shares were trading higher and Prudential shares were sliding in extended-hours trading.
The storm didn't prevent the U.S. Treasury from auctioning $25 billion of 10-year notes, although it may have impacted demand, which was below average with a bid-to-cover ratio of 2.67. The notes had a high yield of 3.692%.
Prices across Treasury securities fell, lifting yields. The price on the short-dated two-year note weakened 4/32, strengthening the yield to 0.883%, and the price on the benchmark 10-year note fell 14/32, lifting the yield to 3.696%. The price on the long-dated 30-year bond weakened 1 1/32, raising the yield to 4.641%.
In other news,
Honda
(HMC) - Get Free Report
widened its U.S. airbag recall to an additional 378,758 vehicles and finished down by 2.2%..
-- Written by Sung Moss and Melinda Peer in New York
.
