Markets Drift Lower, Awaiting Bernanke’s Testimony

Financial markets were lackluster Tuesday as investors paused for breath ahead of testimony from the Federal Reserve chairman, Ben S. Bernanke.

In afternoon trading the Standard Poor’s 500-stock index fell 0.4 percent, the Dow Jones industrial average fell 0.3 percent and the Nasdaq was 0.3 percent lower.

Mr. Bernanke’s comments on Wednesday to lawmakers in Congress could set the tone in markets for the rest of the summer. In particular, investors will be looking for any further guidance on when the Fed will start to reduce its monetary stimulus.

The Fed is currently spending $85 billion a month buying financial assets in the hope of keeping long-term borrowing rates low and stimulating the American economy. The new money created in recent years has been one of the key drivers of markets.

Economic figures in the United States are being largely viewed through the prism of Fed policy. Tuesday’s batch of numbers did little to affect expectations. The 0.3 percent monthly rise in industrial production during June was in line with expectations while the uptick in the annual inflation rate to 1.8 percent from 1.4 percent was largely discounted because it was because of a sharp rise in gasoline prices.

“It’s certainly possible that they could begin tapering their bond purchases later this year, but the absence of higher inflation and the stubbornly high jobless rate suggests that it may not need to do so in the near-term, particularly if those growth expectations fail to materialize,” said Jim Baird, chief investment officer for Plante Moran Financial Advisors.

In Europe, the FTSE 100 index of leading British shares fell 0.5 percent to close at 6,556.35 while Germany’s DAX dropped 0.4 percent at 8,201.05. The CAC 40 in France ended 0.7 percent lower at 3,851.03.

Tuesday’s run of corporate news had little impact despite solid earnings from Goldman Sachs and Johnson Johnson. Coca-Cola’s, though, were disappointing as it reported falling profits and weak volume growth, particularly in North America.

Once Mr. Bernanke’s appearance before lawmakers is over, markets, particularly Wall Street, may return their focus to the earnings reports.

“Corporate earnings season is going to play a much bigger part in driving market sentiment in the coming weeks, than it has over the last couple of years,” said Craig Erlam, market analyst at Alpari. “With investors no longer able to rely on the Fed to drive equity markets higher, they have to make do with focusing more on the fundamentals, and nothing gives us a better overview of these than company earnings reports and their expectations for the coming quarters.”

Earlier in Asia, South Korea’s Kospi fell 0.5 percent to 1,866.36 while Hong Kong’s Hang Seng was flat at 21,312.38. China’s Shanghai Composite Index rose 0.3 percent to 2,065.72.

In currency markets, the euro was up 0.6 percent at $1.3143 while the dollar fell 0.5 percent to 99.35 yen.

Oil prices were steady, with the benchmark contract in New York down 23 cents at $106.09 a barrel.

Article source: http://www.nytimes.com/2013/07/17/business/daily-stock-market-activity.html?partner=rss&emc=rss