Stocks fall as Fed delivers mixed economic outlook
NEW YORK – Another lackluster economic report sent stocks down Wednesday, extending a weeklong slide.
The Federal Reserve report, known as the Beige Book, showed the economy slowed in several U.S. regions for the first time this year. While seven of the Fed's 12 districts reported steady gains, the economy stalled in the New York, Philadelphia, Atlanta, and Chicago regions, the Fed said. Dallas was the only region to report accelerated growth. That was largely due to the effect of higher oil prices on the region's energy industry.
The report added to concerns that have been building since mid-April that the American economy is stalling. High oil prices, bad weather and supply-chain problems following the tsunami and nuclear disaster in Japan have combined to dampen many investors' outlook for the rest of the year. And on Tuesday, Fed Chairman Ben Bernanke acknowledged that the U.S. economic recovery was "uneven" and "frustratingly slow," though he added that he expected growth to pick up in the second half of the year.
That has left many investors on edge. "What Bernanke basically said was that we have to believe we're in a soft patch that will pass by itself," said Randall Warren, chief investment officer at Warren Financial Services. "That takes a lot of faith."
The Standard and Poor's 500 lost 5.38, or 0.4 percent, to 1,279.56 on Wednesday. It was its sixth straight loss. The Dow Jones industrial average fell 21.87, or 0.2 percent, to 12,048.94. The Nasdaq composite slipped 26.18, or 1 percent, to 2,675.38.
Energy companies were among the few stocks to gain broadly. Oil companies like Exxon Mobil Corp, which gained 1 percent, rose after oil settled above $100 a barrel. The jump in oil prices came after OPEC ministers made an unexpected decision to keep output at current levels. Investors had been hoping the cartel would increase output, which could have pushed down the price of crude.
Signs that U.S. supplies were tightening also pushed up oil prices. The American Petroleum Institute said late Tuesday that U.S. crude inventories fell more than expected.
Corporate news reinforced the glum outlook on the economy. Retailer Abercrombie and Fitch Co. fell more than 5 percent after the company said that it expects its second-quarter earnings to come in below first-quarter results. Network equipment maker Ciena Corp. fell 16 percent after reporting a larger loss and lower revenue than analysts had expected. And home builder Hovnanian Enterprises Inc. lost nearly 12 percent after it reported a large second-quarter loss late Tuesday.
The yield on the 10-year Treasury slid to 2.96 percent as investors put money into more stable assets. Yields on bonds fall when their prices rise.
Three stocks fell for every one that rose on the New York Stock Exchange. Consolidated volume was 4.1 billion shares.