Stocks Mixed After Bernanke Undermined Earlier Gains
Published on Thursday, 07 June 2012 17:51 Written by Christopher Lynn
New York, June 7th (TradersHuddle.com) – Stocks lost steam at the end of the session, with major indices ending mixed for the session. Earlier gains propelled by China’s decision to slash interest rates came under pressure after Bernanke’s comments undermined hopes of strong and swift action from the Fed to prop up the U.S. economy amid the challenges of the debt crisis in Europe and sluggish job growth. Financials received additional pressure after the Fed, before the closing bell, announced new capital rules.
The Dow Jones Industrial Average gained 46.17 points, or 0.37%. The S&P 500 index slid less than 1 point, or 0.01%, while the NASDAQ dropped 13.70 points, or 0.48%.
The market started to the upside after futures jumped on news that China cut their interest rate by 25 basis points and slashed the reserve requirement ratio for banks. Adding to the bullish tone, investors saw evidence that European policymakers would act to prop up Spain’s banking sector, sending European shares to close higher. A successful bond offering in Spain also helped eased fears over the deteriorating debt crisis in the region.
The economic data didn’t ruin the positive mood; weekly jobless claims were just slightly better than expected, which helped keep the market near its highs of the session as participants awaited the testimony of the Fed Chairman in Capitol Hill.
The upside move lost some steam after in prepared remarks to the joint economic committee, Ben Bernanke said the Fed is "prepared to take action" if needed to boost the U.S. economy, but made no specific commitment to more easing. The Fed Chief said that the economy continues to expand at a moderate pace but faces ongoing challenges from the debt crisis in Europe and the sluggish job growth.
The remarks undermined hopes form swift action from the Fed amid the slew of weak economic data points that participants have been digesting in the last month. Also weighing on the stocks was a downgrade of Spain by Fitch. Markets lost more steam in the final hour of trading, with the major benchmark indices ending mixed for the day, after the Federal Reserve announced new capital rules for financial institutions.
Utilities, industrials, and consumer staples logged the biggest gains in the S&P 500, while technology and financials closed in negative territory, dragging the broad market index and the tech heavy NASDAQ into the red.
Financials suffered the most into the final hour of trading following the new capital rules announced by the Fed, designed to prevent another financial crisis. Morgan Stanley (NYSE: MS) logged the worst performance in the sector, as shares slumped 3.8%. Meanwhile, Bank of America (NYSE: BAC) lost 2.88% to $7.42, posting the biggest percentage decline in the Dow Jones Industrial Average. Yesterday, BofA has rallied more than 7% on a breakout above its 200day moving average.
On the flip side, Regions Financial (NYSE: RF) rallied 2.4% to $6.09, posting the biggest percentage gain in the financial sector after the stock was upgraded to Outperform from Neutral at Macquarie.
In the tech sector, Juniper Networks (NASDAQ: JNPR) tumbled to the bottom of the S&P 500; as shares lost more than 5% to $16.5 after it was downgraded to a Hold from Buy at Needham. F5 Networks (NASDAQ: FFIV) lost 1.7% to $101.55 in the session, despite Needham initiated its coverage with a Buy rating and a target price of $130.
Apple (NASDAQ: AAPL) added 0.05% to $571.7 after trading as high as $577.32 and as low as $570.50. The stock actually outperformed the sector amid news that Sprint’s Virgin Mobile will start offering a pay as you go iPhone on June 29th.
Meanwhile, Facebook (NASDAQ: FB) fell 1.9% to $ 26.31 after trading as low as $26.15. The stock was not able to extend the gains from the sharp reversal in the prior session after it logged a new record low of $25.52.
Industrials were among the top performers, with stocks like United Technologies (NYSE: UTX) jumping to the top of the blue chip index, as it logged a gain of 2.4% to $75.44.
In the consumer discretionary space, Goodyear Tire (NYSE: GT) jumped more than 3% on news that the company acquired Nippon Giant Tire unit in Japan for an undisclosed amount. Homebuilders also saw some of the top gains in the sector once again, as PulteGroup (NYSE: PHM) jumped 1.4% to $8.88 after the stock was upgraded to Outperform at Credit Suisse.
Elsewhere in the earnings front, J.M. Smucker (NYSE: SJM) added 0.05% to $76.09 after the company posted results that topped expectations in both the top and bottom lines. Men’s Warehouse (NYSE: MW) plunged nearly 19% after the retailer missed earnings estimates and warned of weak earnings in the coming quarter, while lululemon athletica (NASDAQ: LULU) tumbled 8.8% to $63.84. The company beat earnings expectations but issued downside guidance for the quarter and mixed guidance for fiscal 2013, as same-store sales growth is expected to slow.