Stocks lose steam after Bernanke speaks

Up 140 points in the morning, Dow closes only 46 points higher. S&P and Nasdaq finish slightly lower. Stocks fell after Fed Chairman Bernanke remained coy on the possibility of more central bank stimulus for the economy. 

Richard Drew/AP
Federal Reserve Chairman Ben Bernanke appears on a television screen on the floor of the New York Stock Exchange Thursday, June 7, 2012. Stocks lost momentum after Mr. Bernanke failed to signal any imminent action in testimony before a congressional panel.

U.S. stocks lost much of Thursday’s gains after Federal Reserve Chairman Ben Bernanke said the central bank would review the economy before making a decision on further stimulus.

The near-neutral finish follows Wall Street’s best session of the year.

“The strength yesterday in equity markets is not sustainable, with Europe still in trouble and global growth still slowing,” said Jim Russell, chief equity strategist for U.S. Bank Wealth Management.

After a 140-point climb, the Dow Jones industrial average ended at 12,460.96, up 46.17 points, or 0.4 percent. With one more session left in the week, the Dow is up 2.8 percent from last Friday’s close, aided by Wednesday’s nearly 287-point jump.

Halting a winning run at three sessions, the S&P 500 index finished fractionally lower at 1,314.99.

Also breaking a three-day run higher, the Nasdaq composite fell 13.7 points, or 0.5 percent, to 2,831.02.

The major indexes trimmed gains as Bernanke’s words proved less concrete than some might have hoped.

“The markets were maybe looking for him to be a bit more definitive or dovish in his approach, so it’s a mild disappointment, but we didn’t think an imminent signal would be sent,” said Russell.

“Bernanke is looking to fiscal and governmental leaders to bring fiscal-policy ideas to the table, and so far they’ve fallen short. There are limits to monetary policy, and we’re either seeing them or close to it,” he said.

Oil and gold futures also ended lower after the Bernanke testimony.

With less than two weeks before the next Federal Open Market Committee meeting, Bernanke “wasn’t going to be more explicit,” Peter Boockvar, equity strategist at Miller Tabak., said in emailed commentary

Stocks had spent nearly all of Thursday’s session on higher ground after China cut its interest rate in a bid to bolster the globe’s second-largest economy. The move fed into expectations that central bankers around the globe would move to boost growth.

China has been “overt about saying we’re not happy with the current rate of growth, and taking interest rates down is within their tool box,” said Russell.

“We think additional rate actions will be executed by China this year, two or three total of which we got one today,” said Russell, who added that at 6.3 percent, China’s interest-rate environment differs greatly from that in the U.S., where the Fed’s key rate stands near zero.

Late Wednesday, Fed Vice Chairman Janet Yellen said the U.S. economy is still vulnerable and could warrant further stimulus.

“If we had to guess, we would expect the Fed to extend Operation Twist, which is due to shut down or expire on June 30,” said Russell, who adds the Fed might vary its purchases from Treasury bonds to “mortgage bonds or other types to keep rates on the long end of the yield curve low.”

On the data front, the count of first-time applicants filing for jobless benefits declined last week, with claims down to 377,000 from a revised 389,000 the week before.

“This is what we want to see, claims coming down. So it was a nice, moderate surprise,” said Russell of the weekly data.

But “we are cognizant that with the level of intensity of the headlines coming out of Europe that consumers and perhaps even business leaders are taking some sort of pause to hiring and spending,” Russell added.

You've read  of  free articles. Subscribe to continue.

Dear Reader,

About a year ago, I happened upon this statement about the Monitor in the Harvard Business Review – under the charming heading of “do things that don’t interest you”:

“Many things that end up” being meaningful, writes social scientist Joseph Grenny, “have come from conference workshops, articles, or online videos that began as a chore and ended with an insight. My work in Kenya, for example, was heavily influenced by a Christian Science Monitor article I had forced myself to read 10 years earlier. Sometimes, we call things ‘boring’ simply because they lie outside the box we are currently in.”

If you were to come up with a punchline to a joke about the Monitor, that would probably be it. We’re seen as being global, fair, insightful, and perhaps a bit too earnest. We’re the bran muffin of journalism.

But you know what? We change lives. And I’m going to argue that we change lives precisely because we force open that too-small box that most human beings think they live in.

The Monitor is a peculiar little publication that’s hard for the world to figure out. We’re run by a church, but we’re not only for church members and we’re not about converting people. We’re known as being fair even as the world becomes as polarized as at any time since the newspaper’s founding in 1908.

We have a mission beyond circulation, we want to bridge divides. We’re about kicking down the door of thought everywhere and saying, “You are bigger and more capable than you realize. And we can prove it.”

If you’re looking for bran muffin journalism, you can subscribe to the Monitor for $15. You’ll get the Monitor Weekly magazine, the Monitor Daily email, and unlimited access to