Markets close flat as Fed sparks late-day sell-off
Stocks cut gains to end mostly flat after a late-day sell-off on Tuesday as yet another cautious statement from the Federal Reserve on the economy offset strong retail sales data for November.
With trading volume still anemic, the afternoon's drop could be a sign that the major indexes have hit the upper range of a rally that has propelled them all to recent two-year highs.
The Fed, in a policy statement after its last scheduled meeting of 2010, said the economic recovery was still too slow to bring down unemployment and reaffirmed its commitment to buy $600 million in government bonds. The move pushed bond yields sharply higher and pressured financial shares, which are hurt by higher rates.
I'm slightly disappointed that the (Fed) doesn't see the world in the same light that investors do, said Andrew Wilkinson, senior market analyst at Interactive Brokers Group in Greenwich, Connecticut.
The PHLX KBW Bank Index <.BKX> lost 1.5 percent. Recent winners, such as Regions Financial
U.S. retail sales rose for a fifth straight month in November, pointing to a firm rebound in consumer spending, which accounts for roughly two-thirds of the U.S. economy. But shares of Best Buy Co Inc
Best Buy stock sank 14.8 percent to $35.52 and pressured the S&P retail index <.RLX>, which fell 0.5 percent.
The data was encouraging overall and shows that retailers are driving traffic into the stores, said Liam Dalton president of Axiom Capital Management Inc in New York, which oversees about $1.4 billion. But Best Buy is a reminder that there's a lot of discounting and market share being pulled in several directions, meaning it could still be a choppy Christmas season.
The Dow Jones industrial average <.DJI> was up 47.98 points, or 0.42 percent, at 11,476.62. The Standard & Poor's 500 Index <.SPX> was up 1.13 points, or 0.09 percent, at 1,241.59. The Nasdaq Composite Index <.IXIC> was up 2.81 points, or 0.11 percent, at 2,627.72.
Financial stocks were the top losers on Tuesday, with the group <.GSPF> down 0.9 percent, the biggest drop among S&P sectors. Dow component JPMorgan Chase & Co
Dow component General Electric Co
Healthcare stocks were boosted by company news. Medical device maker C.R. Bard Inc
President Barack Obama's tax plan got a boost on Tuesday when a top Democrat in the House of Representatives, where the plan faces its stiffest resistance, said there were compelling reasons to back it. While passage of the bill, which extends all Bush-era tax rates, is expected, many investors are waiting for confirmation of its passage.
About 13 stocks rose for every 17 that fell on the New York Stock Exchange, while on the Nasdaq an equal number of stocks rose and fell.
About 7.2 billion shares traded on the New York Stock Exchange, the American Stock Exchange and the Nasdaq, well below the year's daily average of 8.61 billion.
(Editing by Leslie Adler)
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