New York: Federal Reserve Chairman Ben Bernanke’s dour assessment of the US recovery hit US stocks on Wednesday, as his comment that the economy faced “unusually uncertain” prospects rattled investors.
Stocks tumbled after Bernanke acknowledged the labour market’s continued weakness while offering few specific options to stimulate lending and investment.
“The market sold off because unfortunately there is no remedy provided in Bernanke’s commentary to the rising threat of deflation, the excess capacity in the economy and the malfunctioning of the credit system,” said Joe Battipaglia, market strategist at Stifel Nicolaus in Yardley, Pennsylvania.
“We are now giving up on the notion of a standard recovery in the US economy.”
The Dow Jones industrial average lost 109.51 points, or 1.07%, to 10,120.45. The Standard & Poor’s 500 fell 13.91 points, or 1.28%, to 1,069.57. The Nasdaq Composite dropped 35.16 points, or 1.58%, to 2,187.33.
Bernanke spoke to the Senate Banking Committee in the first of two days of his semiannual testimony to Congress.
His downbeat remarks sapped most of the buying interest even after a spate of strong earnings reports prior to the market’s open. Morgan Stanley was one of the day’s few big winners after it reported stronger-than-expected profit, lifted by new business. Its stock shot up 6.3% to $26.80.
Apple Inc rose 0.9% to $254.24 after it posted robust quarterly results, but the company’s conservative margin forecast limited gains..
Another financial stock showing strength was Wells Fargo & Co, which rose 0.6% to $26.06 after rising loan demand helped lift its earnings more than analysts had expected..
After the closing bell, cellphone chip supplier Qualcomm Inc rose 4% to $37.59 on news its quarterly earnings and revenue beat Wall Street’s estimates on strong smartphone demand.
Online marketplace eBay Inc added 4.1% to $20.99 in extended-hours trading as it beat Wall Street’s quarterly profit estimates, helped by a record performance at its PayPal service..
The benchmark S&P 500 found support during the regular session at its 14-day moving average and held above 1,060, a critical level according to some technical analysts.
Investors have been reluctant to make big commitments in equities due to growing worry about the economic outlook, sparked by disappointing economic data.
“Considering everything the (Fed has) done already, it will be alarming when the time comes that they feel they need to do more,” said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.
Weighing on the Nasdaq were shares of Internet company Yahoo, down 8.5% to $13.91 a day after it posted revenue that missed Wall Street’s estimates.
About 8.68 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year’s estimated daily average of 9.65 billion.
Declining stocks outnumbered advancing ones on the NYSE by a ratio of about 2 to 1, while for every stock that rose on the Nasdaq, about three fell.