NEW YORK – Wall Street pulled back Tuesday, finishing slightly lower as investors grappled with an economic assessment by the Federal Reserve that warned yet again of inflation risks and reported a substantial slowing of the housing sector.
The Dow Jones industrial average was down 12.90, or 0.10 percent, at 12,315.58. Earlier in the day, it fell more than 76 points.
Broader stock indicators also fell, but closed above their lows as well. The Standard & Poor's 500 index slipped 1.48, or 0.10 percent, to 1,411.56, and the Nasdaq composite index fell 11.26, or 0.46 percent, to 2,431.60.
The statement, which accompanied the Fed's widely expected decision to keep the nation's benchmark interest rate unchanged at 5.25 percent, left open the possibility that the central bank might raise rates if inflation accelerates. That disappointed some investors who were hoping for signs that the Fed was moving toward cutting rates.
Investors fear that an increase could cause problems if it comes as the economy — in particular the interest rate-dependent housing sector — is still slowing. The Fed's statement described of the housing market's slowdown as "substantial," a change from past statements.
Still, while the Fed has said its primary concern is inflation, it is also monitoring the overall economy for signs of too much of a slowdown. The Fed predicted, "the economy seems likely to expand at a moderate pace on balance over coming quarters."
Overall, the statement indicated that the Fed wants to keep rates steady for as long they can, analysts said.
"They're trying to talk tough in the hopes of not having to act tougher," said Jack Caffrey, equities strategist at J.P. Morgan Private Bank.
Crude oil for January fell 27 cents to settle at $60.95 a barrel on the New York Mercantile Exchange.
Bonds climbed after the Fed meeting, with investors relieved that little had changed in the central bank's statement. The yield on the benchmark 10-year Treasury note fell to 4.49 percent, down from 4.52 percent late Monday. The dollar was mostly lower against other major currencies, while gold prices fell.
Another sign that the economy is still faring well was the Commerce Department's report Tuesday that the trade deficit fell to $58.9 billion in October, much lower than economists were anticipating. The 8.4 percent drop from September, the biggest percentage drop in 5 years, was a result of moderating oil prices — a factor that the Fed took into consideration at its meeting Tuesday.
"The Fed continues to believe in the forecast it set forth during the summer, that continued economic growth remains intact," said Alan Gayle, senior investment strategist at Trusco Capital Management. "It continues to believe inflation will moderate, but it has to remain vigilant until that happens."
Stocks had been even lower throughout the day, as tepid profits at Best Buy Co. (BBY) signaled that demand for electronics may not boost holiday sales as much as anticipated. Best Buy's third-quarter profit rose, but came in below expectations as the electronics retailer lowered prices to move merchandise. It was a sign that demand during the peak shopping season might not meet investors' hopes. Best Buy declined $2.62, or 4.9 percent, to $51.30.
Tuesday's corporate news wasn't all dour — Goldman Sachs (GS), Wall Street's largest investment bank, reported its fourth-quarter profit nearly doubled on high merger-and-acquisition activity, the hot commodities market, and soaring stocks. The Dow surpassed 12,000 for the first time this fall.
However, Goldman Sachs fell $1.56 to $200.97, as concerns arose that the investment firm's performance may have peaked.
The steel sector faltered after Nucor Corp. (NUE) said it expected earnings for the upcoming quarter to fall below what analysts were forecasting. Shares of Nucor fell $4.75, or 7.4 percent, to $59.60.
Meanwhile, Citigroup (C) fell 63 cents, or 1.2 percent, to $52.25 after it named Robert Druskin as its new chief operating officer position late Monday. The announcement was a letdown for some investors who had been hoping for a large-scale management overhaul at the New York investment bank, which has seen its shares slump this year on weak revenue.
Declining issues outnumbered advancers by about 4 to 3 on the New York Stock Exchange, where consolidated volume came to 2.71 billion shares, compared to 2.29 billion shares Monday.
The Russell 2000 index of smaller companies fell 4.66, or 0.59 percent, at 788.41.
Overseas, Japan's Nikkei stock average close up 0.66 percent. In late trading, Britain's FTSE 100 closed down 0.06 percent, Germany's DAX index closed up 0.10 percent, and France's CAC-40 closed down 0.01 percent.