Sept. 20, 2011, 5:34 p.m. EDT
U.S. stocks mostly lose gains ahead of Fed
By Kate Gibson, MarketWatch
NEW YORK (MarketWatch) — U.S. stocks squandered most gains Tuesday as Wall Street looked for signs of resolution to Europe’s debt crisis and for steps from the Federal Reserve to juice the economy.
“A lot of it at this point really trades over optimism or pessimism about Europe; it’s a giant game of chicken, as the political forces in Europe have the power to make this go away,” said Bruce McCain, chief investment strategist at Key Private Bank.
McCain said the Fed will probably implement a few measures to help the economy that don’t involve adding more to the central bank’s balance sheet.
After rising as much as 148 points, the Dow Jones Industrial Average (DJI:DJIA) finished up 7.65 points, or 0.1%, at 11,408.66. Of its 30 components, 16 advanced, led by a 1.3% increase in shares of Home Depot Inc. (NYSE:HD)
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The S&P 500 Index (SNC:SPX) slipped 2 points at 1,202.09, with defensive sectors utilities, health care and telecoms performing the best.
The Nasdaq Composite Index (NASDAQ:COMP) dropped 22.59 points at 2,590.24.
For every stock rising, nearly two declined on the New York Stock Exchange, where 926 million shares changed hands.
In a teleconference during the session, Greek officials and international lenders discussed the next installment of emergency funds viewed as needed to keep the country from defaulting on its debts. Europe stocks gained Tuesday on optimism for an agreement. Read more on Europe Markets.
Media reports cited Greece’s semi-official Athens News Agency as saying, without quoting any sources, that the so-called “troika” — consisting of European Commission, the European Central Bank and the International Monetary Fund — was expected to arrive in Athens in early October to complete an evaluation of Greece’s reforms program.
“The Greek populace is going to have to get used to an austere future to deal with their problems, and the Germans are going to have to get used to paying more of the bill than they are used to if they want to salvage their own economy,” said McCain at Key Private Bank.
The Fed’s two-day policy meeting, concluding Wednesday, could have the central bank taking additional steps to bolster the economy. Read more on expectations for Federal Open Market Committee meeting.
Many expect the Federal Open Market Committee to opt for a move known as “Operation Twist,” which would involve the central bank selling shorter-term notes and buying longer-term Treasury bonds in an effort to bend the yield curve.
“There is a significant segment that always looks at the Federal Reserve as a generous grandparent ready to bestow a new treat,” added McCain of investors’ expectations.
ConAgra Foods Inc. (NYSE:CAG) shares fell 1.7% after the food manufacturer reported a first-quarter profit below Wall Street’s expectations but maintained its full-year earnings forecast.
Shares of Oracle Corp. (NASDAQ:ORCL) fell 2.3%. At the end of the day’s trading, the business-technology provider reported a fiscal first quarter profit of $1.84 billion, or 36 cents a share, compared with a profit of $1.35 billion or 27 cents a share in the year-earlier period. Read about Oracle’s results.
“There is uncertainty about this quarter’s reports. If companies continue to meet or beat expectations, it will be difficult for investors to ignore the deeply discounted valuations. However, this week is more likely to struggle with short-term news from housing, the Fed and Europe,” wrote Marc Pado, U.S. market strategist at Cantor Fitzgerald, in an emailed note.
Wall Street offered little reaction to a Commerce Department report that U.S. housing starts fell 5% in August, illustrating a still troubled industry. Read more on housing starts.
Stocks had wobbled in negative territory shortly following the open, after the International Monetary Fund reduced its outlook for global economic growth, saying the repercussions could be severe should Europe not succeed in containing its debt troubles, or if U.S. lawmakers fail to reach agreement on a fiscal plan.