Stocks Slumped after the Fed Failed to Impress
Published on Wednesday, 20 June 2012 18:46 Written by Christopher Lynn
New York, June 20th (TradersHuddle.com) – Stocks were not able to move into positive territory after participants’ hopes for additional and aggressive stimulus from the Fed were dashed. The central bank announced the extension of its operation twist, but benchmark indices took mild declines following the policy statement and Ben Bernanke’s press conference.
The Dow Jones Industrial Average lost 12.94 points, or 0.10%. The S&P 500 index fell 2.29 points, or 0.17%, while the NASDAQ added less than 1 point, or 0.02%.
The market started with modest gains as participants shifted all their focus to the Fed and the FOMC policy directive. Stocks had been anticipating that the string of weak data coupled with the impacts of a deteriorating debt crisis in the euro zone would spring the Fed into action and at least extend operation twist. Overseas markets had a mixed and lackluster session, while Procter & Gamble (NYSE: PG) cut guidance, citing slower than anticipated revenues from developed regions.
Stocks traded in a tight range and took mild losses after the FOMC policy announcement, in which policy makers extended its current buying and selling bonds in an effort to keep long-term interest rates down. The Fed said that this program would be extended with another $267 billion. However, both the statement and Ben Bernanke’s press conference dashed hopes for additional stimulus measures, with the markets moving into negative territory, as the operation twist announcement was already baked in.
All of the S&P 500 sectors turned negative after Bernanke started to speak, but some of the sectors were able to close in positive ground. Financials and technology edged higher, while utilities, materials, and industrials logged the biggest declines, closely followed by the staples sector. In the financial sector, JPMorgan (NYSE: JPM) rallied 3% to top the Dow Jones Industrial Average after the lender said that it has exited 65-70% of the position that generated the massive $2 billion loss.
Also in the sector, Discover Financial (NYSE: DFS) gained 1.7% after posting its earnings in the prior session. The credit-card issuer reported earnings that fell more than 10%, but still was able to attract positive comments from several analysts, like FBR Capital that has a target price of $39 in the stock and from RBC Capital.
In tech-land, Adobe (NASDAQ: ADBE), the document and media software publisher, slumped 2.7% in the session after the company beat earnings and revenue expectations, but issued mixed guidance for the current quarter, with revenues below consensus. Adobe blamed softness in Europe for the new outlook, as European sales represent 30% of the company’s revenue.
However, Jabil Circuit (NYSE: JBL), the provider of electronic manufacturing services for international electronics companies, surged to the top of the sector and the broad market index, as shares rallied 6.8%. Jabil reported inline earnings and revenues, while Needham raised its target price on the stock to $29 from $25.
Cisco Systems (NASDAQ: CSCO) was another top performer in the sector, with shares climbing nearly 2% to $17.52 after it was upgraded to Outperform from Market Perform at BMO Capital.
Apple (NASDAQ: AAPL) slid 0.28% to $585.74 as the stock continues to struggle near its calculated resistance at $588.50. Earlier in the week, the stock closed above its 50day moving average at the $578 level. Yesterday, Apple underperformed as Microsoft unveiled its new Surface tablets to compete with Apple’s iPad juggernaut.
Elsewhere, Facebook (NASDAQ: FB) slid 0.97% to $31.60, as the stock saw strong resistance below the $32 per share level. Yesterday, Facebook announced changes to improve its payment systems, launching an option of subscription payments for apps
Consumer stocks were pressured following P&G’s lackluster guidance. The stock slumped to the bottom of the blue chips, as they tumbled 2.9% to $60.39. While, Industrials were also under pressure, with Caterpillar (NYSE: CAT) falling 1.9% in the session and logging the second biggest decline in the Dow.
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