Stocks mostly off after Fed cuts growth outlook
NEW YORK (MarketWatch) -- U.S. stocks ended mostly lower Wednesday after the Federal Reserve cut its growth forecasts and Chairman Ben Bernanke said the labor market had lost some steam.
"If we get another disappointing jobs number, the odds are the Fed is going to announce its much-anticipated QE3 (third round of quantitative easing) at its next meeting in early August," said Ryan Sweet, senior economist at Moody's Analytics.
"If we're not seeing sustained improvement in the labor market that would require additional action," Bernanke told reporters at a press conference. Read full Fed story here.
"The Fed needs to remain very aggressive because the recovery is fragile; the Fed is trying to steer us through this soft patch. With a little luck this will be just that and nothing worse," Sweet said.
After a 92-point fall, the Dow Jones Industrial Average (DJIA) ended at 12,824.39, down 12.94 points, or 0.1%.
Halting its winning streak at 4 sessions, its longest up run since late May, the S&P 500 (SPX) lost 2.29 points, or 0.2%, to 1,355.69, with utilities and natural-resource shares hardest hit and financials and technology faring best among its 10 industry groups.
Extending its gains into a fifth session, the Nasdaq Composite (COMP) added 0.69 point to 2,930.45.
For every three stocks on the decline four advanced on the New York Stock Exchange, where 751 million shares traded. Composite volume neared 3.7 billion.
Treasury prices mostly ell, with the yield on the benchmark 10-year note (10_YEAR) rising to 1.642%, as the dollar edged up against other major currencies. The U.S. Dollar Index (DXY) lately stood at 81.594.
Stocks drew a short-lived boost after German Chancellor Angela Merkel reportedly said it was possible that the European rescue fund could purchase bonds, but added her comment reflected "a purely theoretical statement about the legal situation."
Ending a two-day meeting, the Fed said it would expand its program to replace short-term bonds with longer-term debt by $267 billion through the end of 2012. The first Operation Twist had been set to expire this month.
"It's no surprise that the Federal Reserve extended 'Operation Twist.' It really in my opinion doesn't go far enough, but then again if they try to lower rates further, which seems to be their modis operandi, it really isn't going to be that much more helpful," said Robert Pavlik, chief market strategist at Banyan Partners LLC.
Much like the Bank of England and the European Central Bank before it, "the Fed is inching towards additional easing," emailed Dan Greenhaus, chief global strategist at BTIG LLC.
Language adjustments in the Fed's statement indicate "they are less than happy with the current rate of expansion," Greenhaus added.
The Fed basically took a small step to buy itself more time to gauge whether the "slowdown in the jobs market is real or payback for the mild winter," said Sweet at Moody's Analytics, referring to thinking that seasonal hiring that normally takes place in the spring and summer began earlier due to the warmer weather.
"Not doing anything was not an option," Sweet added.