New York: US stocks extended a losing streak for a fifth day on Tuesday on mounting concerns about the economy after bearish comments from Federal Reserve chairman Ben Bernanke.
The market, which started off on a positive note after the S&P 500 hit a two-month low in the previous session, reversed course to turn negative after Bernanke started speaking. He acknowledged a slowdown in the economy, but offered no suggestion the central bank is considering any further monetary stimulus to support growth.
Bernanke also issued a stern warning to lawmakers in Washington who are considering aggressive budget cuts, saying they have the potential to derail the economic recovery.
“It’s not like the market was expecting a positive comment from him, but not quite this negative, either. But I think the impact would be limited. I don’t see this carrying over to tomorrow’s market,” said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.
Bernanke indicated the latest bout of weakness probably would not last very long and should give way to some growth in the second half of the year.
A batch of weak economic data recently, especially in the job market, has pushed major indexes below their support levels.
The Dow Jones industrial average slipped 19.15 points, or 0.16%, to end at 12,070.81. The Standard & Poor’s 500 Index declined 1.23 points, or 0.10%, to 1,284.94. The Nasdaq Composite Index shed 1.00 point, or 0.04%, to finish at 2,701.56.
CORRECTION SEEN, BUT NO BEAR
The S&P 500 has fallen 4.2% from a month ago. But a veteran chief equity strategist said the three major U.S. stock indexes could fall as much as 10% from their May highs, suggesting that a low in the market might be not far off.
Barring unexpected shocks, though, a bear market is unlikely, Tobias Levkovich, the Citigroup strategist, told the Reuters 2011 Investment Outlook Summit in New York.
“I think we are in a correction,” said the Canadian-born strategist, whose year-end forecast for the benchmark S&P 500 index is 1,400 points.
A 10% drop from the May 2nd intraday peak of 1,370.58 would put the S&P 500 at 1,233.52.
Defensive stocks in the healthcare and utility sectors added to gains after Bernanke’s comments, but financials and info technology, sectors closely related to growth, turned negative. The KBW bank index, which rose 1% earlier, ended down 0.2%.
Volume was thin with 6.67 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, below the daily average of 7.61 billion.
“The problem for institutions on a day like today is the volume being light. Any concerted effort to raise funds (sell positions) could have a disproportionate impact on pricing as buyers will be on the thin side,” wrote Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey, in a note to clients.
In company news, International Paper Co launched a $3.3 billion unsolicited offer for rival Temple-Inland Inc. Shares of Temple-Inland shot up 40.4% to $29.49, while IP’s stock rose 0.4% to $29.78. Temple-Inland said it adopted a stockholder rights plan to fend off the hostile takeover.
Advancing stocks outnumbered declining ones on the NYSE by 1,684 to 1,297, while on the Nasdaq, advancers beat decliners by 1,440 to 1,131.