Stocks Finish Mixed After Bernanke Buzzkill, Spain Downgrade


NEW YORK (TheStreet) -- U.S. stocks closed on a mixed note Thursday, held in check by Federal Reserve Chairman Ben Bernanke's non-committal stance on additional stimulus measures and a downgrade of Spain's credit rating by Fitch.

The Dow Jones Industrial Average rose 46 points, or 0.4%, to close at 12,461, settling more than 90 points below a session high of 12,555.

The S&P 500 finished flat at 1315, snapping a three-day winning streak. The Nasdaqshed nearly 14 points, or 0.5%, to finish at 2831.

Breadth was mixed on the Dow with 16 of 30 components finishing in the green. Procter & Gamble ( PG), United Technologies ( UTX) and Home Depot ( HD) were the biggest gainers.

Blue-chip decliners included Bank of America ( BAC) and Hewlett Packard ( HPQ).

Wall Street got an early lift after the People's Bank of China slashed its benchmark lending and deposit rates by 0.25 percentage points to prevent excessive cooling of economic growth in the country.

The PBOC also said that it will give the green light for the deposit rate to soar by 110% of the benchmark rate and the lending rate to decline to 80% of the benchmark.

That added to already heightened expectations that Fed Chairman Ben Bernanke would hint at the possibility of more quantitative easing to boost the U.S. economy in his testimony before the Joint Economic Committee in Congress on Thursday.

Bernanke, though, retained a neutral tone on the topic of monetary easing in his testimony suggesting the central bank intends to remain in wait-and-see mode, and may not take action at the FOMC meeting in two weeks.

The chairman maintained that the situation in Europe continues to pose significant risks to the U.S. financial system and economy, and that "as always," the Federal Reserve remains "prepared to take action as needed" and that it has the tools available to do this.

He added that if the so-called "fiscal cliff" were allowed to occur with the severe tightening of fiscal policy -- built into the current law -- at the start of the next year, it could "pose a significant threat to the recovery."

Also of note , Bernanke wasn't as downbeat about the U.S. jobs picture as the markets had expected following last Friday's dismal nonfarm payrolls number, explaining that the "apparent" slowdown may have been "exaggerated" by seasonal adjustment and weather-related issues. He highlighted consumer sentiment as a bright spot, saying that despite mixed readings, sentiment is nevertheless "up noticeably" from levels late last year.

Federal Reserve Vice Chair Janet Yellen was more forthcoming about her thoughts on monetary easing, saying Wednesday night that "risk management considerations arising from today's unusual circumstances strengthen the case for additional accommodation," suggesting that the Fed could ramp up its bond purchasing program or hold off on interest rate hikes.

In other U.S. news, the Labor Department reported Thursday that weekly initial jobless claims for the week ended June 2 fell to 377,000 from the previous week's upwardly revised figure of 389,000. The decline was the first since April. Economists surveyed by Briefing.com expected the number of Americans filing unemployment claims for the first time to slide to 375,000.

"The underlying trend in claims is still upwards, but we expect it to turn back down again very soon," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. "The economic story, we think, is that the gas price hit is reversing."

The FTSE in London settled up 1.2% and the DAX in Germany closed up 0.8% after the eurozone's strongest economy indicated some willingness to take on more balance sheet risk for some the peripheral countries.

The euro, however, slipped after Fitch downgraded Spain's rating to BBB with negative outlook.

The Hang Seng Index in Hong Kong settled up 0.9% and the Nikkei in Japan rose 1.2%

The July crude oil contract fell 20 cents to settle at $84.82 a barrel. August gold futures dropped $46.20 to settle at $1,588 an ounce.

The benchmark 10-year Treasury was up 2/32, lowering the yield to 1.657%. The greenback was off 0.2%, according to the dollar index, which compares the buck to a basket of currencies.

In corporate news, Men's Wearhouse ( MW), the specialty retailer, on Wednesday forecast earnings of $2.70 to $2.78 a share for the full year, below analysts' expectation of $2.80 a share. For the second quarter ending in July, Men's Wearhouse said it sees earnings of $1.12 to $1.13 a share vs. the current consensus view of $1.22 a share. Shares plunged 19%.

Heavy truck maker Navistar International ( NAV) reported second-quarter loss of $2.50 a share as revenue fell 2% to $3.3 billion and the company lowered forecasts for 2012 adjusted earnings to between breakeven and $2 a share. Analysts surveyed by Thomson Reuters expected second-quarter earnings of 67 cents a share on revenue of $3.6 billion, and a full-year profit of $3.73 a share. Shares tumbled 14%.

Lululemon Athletica ( LULU) reported first-quarter earnings of $46.6 million, or 32 cents a share, up from year-earlier earnings of $33.4 million, or 23 cents a share. The athletic wear retailer posted first-quarter revenue of $285.7 million. Analysts, on average, anticipated first-quarter earnings of 30 cents a share on revenue of $270.9 million. Shares sank nearly 9%.


-- Written by Andrea Tse and Shanthi Bharatwaj in New York.

>To contact the writer of this article, click here: Andrea Tse.

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