Traders-Blog.com

Stocks finished mostly lower, as jitters dominated sentiment ahead of Federal Reserve Chairman Ben Bernanke’s speech tomorrow, with Wal- Mart Stores leading the Dow lower after the retailer’s shares were cut to sell by Merrill Lynch. Investors mulled strong economic growth in the second quarter and more problems in the credit market.

Today, the Dow Jones industrial average closed down 50.56 or 0.38% to 13,238.73, and the broader S&P 500 closed down 6.12 or 0.42% to 1,457. 64. The Nasdaq Composite closed up 2.14 or 0.08% to 2,565.30.

Market breadth was negative. On the New York Stock Exchange, losers beat winners by 19 to 13 on volume of 1.28 billion shares. On the Nasdaq, decliners beat advancers by 16 to 12 on volume of 1.85 billion shares.

That volatility seen today isn’t likely to disappear anytime soon. The trump card here is the Fed, with the market basically begging for a rate cut, and the Fed still on hold. Fed chair Bernanke is due to speak tomorrow at an economic symposium in Jackson Hole, Wyoming and stock investors are hoping he’ll stress that the central bank is prepared to step in should markets deteriorate further. The Fed has been injecting billions into the banking system over the last few weeks, the bank also cut the discount rate - which affects bank loans. Now investors are looking for signs that the bank will also cut the fed funds rate.

The second-quarter GDP grew at 4.0% annual rate, revised up from an initial reading of 3.4%. The strength of the report suggested that the economy is holding up despite the ongoing problems in the housing market. This is perhaps a negative for stock investors looking for signs that the Fed will have to cut interest rates at the Sept. 18 policy meeting.

Shares of First data closed up $0.17 to $32.90, on news that private equity firm KKR is in talks with a number of big Wall Street banks regarding the $24 billion it requires to complete the deal to acquire the company. KKR has been one of the most aggressive private equity firms, buying firms at a 10 to 15% mark-up. The company has brokered $140 billion worth of deals this year.

Shares of H&R Block Inc. fell 1.7% after reporting a wider fiscal first-quarter loss and stating that it’s discussing changes to its agreement to sell Option One Mortgage Corp. to the private-equity firm Cerberus Capital Management.

Shares of Wal-Mart Stores closed down $0.87 or 2% to $43.32, after Merrill Lynch cut them to sell, citing margin erosion at the company’s core U.S. division.

Stock of Sigma Designs closed up $4.07 to $42.70, after the chipmaker reported higher quarterly sales and revenue that topped estimates.

U.S. light crude oil for October delivery fell 15 cents to settle at $73.36 a barrel on the New York Mercantile Exchange.

All the best,
Manuel Jesus-Backus
The Portfolio Crafter