Traders-Blog.com

Stocks pared losses but still ended lower after the chairman of the Federal Reserve reiterated concerns about inflation and disappointed investors hoping that weaker growth would soon push the Fed closer to cutting interest rates. Federal Reserve Chair Ben Bernanke said the U.S. economic outlook has become more uncertain in recent weeks, reviving recession worries.

Today, the Dow Jones industrial average closed down 96.93 or 0.78% to 12,300.36, the broader S&P 500 closed down 11.38 or 0.80% to 1,417.23, and the Nasdaq composite closed down 20.33 or 0.83% to 2417.10.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by 21 to 11 on volume of 1.522 billion shares. On the Nasdaq, decliners topped advancers 19 to 9 on volume of 1.905 billion shares.

Bernanke’s address for the Joint Economic Committee of Congress. stated that core inflation remains uncomfortably high. The Fed chief said that while inflation was still likely to moderate over time, the risks remained to the upside. He also said that the near-term outlook for the housing market is uncertain, and that the impact from the sub-prime mortgage fallout has raised more questions. The bottom line is that he expects moderate economic growth to be sustained, but there definitely is a sense that the downside risks to that forecast are growing and the likelihood of an upside surprise is shrinking.

Tomorrow, the fourth-quarter reading on the gross domestic product growth, is expected at a 2.2%. February durable goods orders rose 2.5% versus a 9.3% decline in January, missing expectations.

Shares of Beazer fell 8.4% after it sated that it is the target of a federal criminal probe into its role in arranging mortgage loans for buyers in its subdivisions. Beazer said the U.S. Attorney hasn’t alleged any wrongdoing, but just asked for documents.

Stock of Wal-Mart Stores dropped 1.9% after news it has shelved its plan to open a New York City store, The New York Times reported, citing a meeting CEO Lee Scott had with editors and reporters of the newspaper.

Shares of Circuit City closed up $0.35 to $19.23, after stating that it will consider the sale of its Canadian unit InterTAN and will lay off 3,400 employees and replace them with lower paid workers as part of a broader restructuring.

Oil prices trimmed some gains after the release of the weekly oil inventories report, but still settled above $64 a barrel on the New York Mercantile Exchange. Prices have been on the rise amid worries about the conflict with Iran, the No. 4 oil exporter.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter
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