Reacting to Fed Minutes, Indexes Dip but Recover

Reacting to Fed Minutes, Indexes Dip but Recover

By THE ASSOCIATED PRESS
Published: July 11, 2012
The stock market bounced back from an afternoon slump Wednesday after the Federal Reserve released disappointing minutes from its June meeting.

At the meeting, the most recent, Fed policy makers cited several threats to the United States economy, including a slowdown in China and a looming budget squeeze in Washington.


The Fed also did not signal that new steps to stimulate the economy were on the way, and that tripped up the stock market, said Steven Ricchiuto, chief economist at Mizuho Securities USA. He said many traders had hoped to see evidence that the Fed was prepared to begin a new bond-buying effort to prod the economy.

“They didn’t get what they wanted to see,” Mr. Ricchiuto said.

Stock investors took the news badly at first, but by the end of the day they were taking it in stride. The Dow Jones industrial average dropped as many as 118 points shortly after the 2 p.m. release of the Fed’s minutes, but recovered most of its losses by the closing bell.

The Dow closed down 48.59 points, at 12,604.53. The Standard & Poor’s 500-stock index slipped 0.02 of a point to close at 1,341.45. The Nasdaq composite index lost 14.35 points to close at 2,887.98.

This was the fifth consecutive loss for the Dow. With Europe still completing details of a bailout for Spanish banks and the American economy still sluggish, investors appear to have little incentive to buy stock.

“The bottom line is that there aren’t a lot of investors willing to put money into this market,” said Jeffrey Kleintop, chief market strategist at LPL Financial. “There’s not much to get excited about.”

Corporate earnings for April through June, which started to come in this week, are not expected to help the stock market. Financial analysts forecast that companies in the S.& P. 500 will report a 2 percent decline in earnings for the period compared with a year ago, according to the research firm S.& P. Capital IQ. That would be the first decline in profits since the summer quarter of 2009.

Chevron and other energy stocks rose, following oil prices higher. The price of crude oil jumped $1.90, to $85.81 a barrel, after the government said crude supplies had fallen for a second week in a row, a sign that demand for energy may be increasing.

Energy stocks led the 10 industry groups in the S.& P. 500 index, rising 1.4 percent. Chevron gained 97 cents to $104.85 and Exxon Mobil gained $1.27 to $84.38.

In the bond market, the price of the Treasury’s 10-year note fell 4/32, to 102 5/32, while its yield rose to 1.52 percent, from 1.50 percent late Tuesday.