Alexa
  • Directory of Taiwan

Stocks dip as Bernanke gives guarded outlook

Stocks dip as Bernanke gives guarded outlook

Caution returned to Wall Street Tuesday as Federal Reserve Chairman Ben Bernanke issued a guarded outlook on the U.S. economy.
Stocks dipped in morning trading following a big advance Monday that sent the Standard & Poor's 500 index into positive territory for the year and the Dow Jones industrials up more than 200 points. Positive news on the housing market drove the gains.
Careful remarks from Bernanke gave investors little comfort. The Fed chief told Congress that the economy should start growing again later this year, but he warned that economic activity is likely to be held back by more job losses.
The mix of caution and optimism contained in Bernanke's remarks highlighted the conflicting forces that have been tugging at the market in recent weeks.
An increasing amount of upbeat economic data has driven stocks to their best two-month performance in nearly 35 years. However a number of dark clouds still hang over Wall Street, including growing unemployment and mixed news from first-quarter corporate earnings reports.
This week, two major news events could easily upset the market's mood. Results are due out Thursday for the government's "stress tests" on banks, and on Friday the government will report monthly payroll data, one of the economic indicators most closely watched by investors.
In midmorning trading, the Dow was down 12.35, or 0.2 percent, to 8,414.39. The Standard & Poor's 500 index fell 4.31, or 0.5 percent, to 902.93, while the Nasdaq composite index fell 16.16, or 0.9 percent, to 1,747.40.
Among the economic data Tuesday, a private report on the service sector showed a seventh straight month of contraction, but the pace of decline slowed more than expected _ further evidence to investors that the economy's slide is moderating. But the report did little to stoke buying.
Investors are particularly focused this week on the results of the stress tests, which will provide details on the U.S. banks in need of more capital. Reports have surfaced indicating that Citigroup Inc., Bank of America Corp. and Wells Fargo & Co., as well as a handful of regional banks, will be among those needing help.
On Tuesday, The Wall Street Journal said about 10 of the 19 banks undergoing the tests will be required to boost their capital levels as a buffer against potential future losses. The report cited several unidentified people familiar with the matter.
Regulators have said no large institution will be allowed to fail, and have pledged government funds if necessary. Though some investors are worried the report could indicate more pain in the industry than previously thought, many analysts say results of the tests are largely priced into the market already.
On Monday, investors were heartened by news that pending U.S. home sales rose more than expected for a second straight month of gains, and construction spending rose in March after five months of declines. With Monday's gain, the S&P 500 has soared 34.1 percent since the rally began March 9. The Dow is up 28.7 percent.
Investors are mindful that the stock market typically turns around, on average, about four months ahead of the economy. But analysts warn that the market's advance will continue to be put to the test, and could easily unravel if investors are shaken enough by some piece of disappointing news.
In earnings news, Dow component Kraft Foods Inc. said its first-quarter profit rose a better-than-expected 10 percent even as sales dropped. Shares of the maker of Velveeta, Oreo cookies and Maxwell House coffee jumped more than 7 percent, adding $1.74, or $26.
CVS Caremark Corp.'s profit fell slightly on charges and higher costs, outweighing a 12 percent jump in the drugstore operator's revenue from higher pharmacy sales. And Duke Energy Corp. said its first-quarter earnings fell 25 percent as the recession cut demand for electricity among its industrial customers.
Bond prices were little changed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, held steady at 3.16 percent.


Updated : 2021-05-15 07:14 GMT+08:00