The absence of an announcement on any new economic stimulus by the Federal Reserve chairman appeared to briefly disappoint investors on Friday, sending Wall Street indexes down by more than 1 percent, but they more than made up the decline by afternoon.
The financial markets had pinned their hopes early this week on some new announcement by the Fed chairman, Ben S. Bernanke, of aid to the economy at a symposium in Jackson Hole, Wyo., on Friday. But expectations began to wane by Thursday, when indexes closed more than 1 percent lower.
On Friday, shortly after Mr. Bernanke started to deliver his speech, investors generally got what they had been expecting. Mr. Bernanke said the economy was recovering and the nation’s long-term prospects remained strong, but he offered little indication of any plans for additional measures to bolster short-term growth.
The Standard Poor’s 500-stock index promptly slipped 2 percent. The Dow Jones industrial average lost 1.8 percent, and the Nasdaq composite index slipped 1.3 percent. But within a half-hour, there was some recovery, and by afternoon, the S. P. was up 1.5 percent, the Dow was up 1.3 percent and the Nasdaq rose more than 2 percent.
“It was a bit of a nonevent,” said Schwab’s chief investment strategist, Liz Ann Sonders, referring to the impact of the speech.
While Mr. Bernanke “did not close the door to anything,” she said, it appeared that the Fed wanted to give itself more time to assess the economy. “They continue to say they expect growth to pick up in the second half of the year. At least that is a non-negative.”
Mr. Bernanke made his standard announcement that the Fed would take any steps necessary to help the economy, and he said the issue would be discussed at the next meeting of the Fed’s policy-making board, in late September. But he made no mention of the measures the Fed might take, something he has provided on several occasions earlier this year.
Nigel Gault, the chief United States economist for IHS Global Insight, said the initial equity market reaction to the Fed statement was negative since there was no mention of new action, but the market probably turned around in the hope that action would still come in September. “Unfortunately, the Fed doesn’t have any rabbits to pull out of the hat to magically re-ignite economic growth,” said Mr. Gault.
Still, there were other factors at work on the markets on Friday. Technology shares pulled up the broader market, and on the Nasdaq, Aruba Network rose more than 20 percent. It reported on Thursday that fiscal fourth-quarter revenue was up 47 percent year over year, and the company said it was confident it would increase market share in the 2012 fiscal year.
Aside from corporate results, there were economic data points to contend with. After taking in disappointing jobs data on Thursday, the markets heard that gross domestic product for the second quarter rose at annual rate of 1.0 percent, the Commerce Department said, a downward revision of its prior estimate of 1.3 percent. Economists had expected growth to be revised down to 1.1 percent. In the first quarter, the economy advanced just 0.4 percent.
Clark Yingst, the chief market analyst at Joseph Gunnar, said the markets had already sent out signals before the speech that investors did not appear to be expecting anything new, but he also said they could be reacting to the new G.D.P. number. Stocks and the dollar were lower, and gold firmed slightly.
“The slight weakness in the dollar might be a knee-jerk reaction to that,” Mr. Yingst said of the new data. “The market is still anticipating certainly no official announcement of any change in monetary policy.”
Gold, which is typically a safe-haven asset, has been declining in recent days as many analysts said it was overpriced. On Friday Comex futures showed a slight increase, rising to $1,785.30 an ounce.
“Gold and the dollar are inversely related, so I think on the headline G.D.P. report, gold is higher,” Mr. Yingst said. “It may be nothing more than a bit of a bounce. I don’t think the action in gold and the dollar is anticipating something” from Mr. Bernanke.
The benchmark 10-year Treasury bond yield was lower at 2.185 percent.
Stock markets in Europe also fell for a second day, and markets in Asia were mixed on Friday.
Markets continued downward Friday in Hong Kong, where the Hang Seng index was 0.86 percent lower by midafternoon, and in India, where the Sensex was down 1.1 percent by the afternoon. The Nikkei 225-stock index rose 0.3 percent after Prime Minister Naoto Kan announced his resignation.
Binyamin Appelbaum contributed reporting from Jackson Hole, Wyo., and Julia Werdigier contributed from London.
Article source: http://www.nytimes.com/2011/08/27/business/global/daily-stock-market-activity.html?partner=rss&emc=rss
Speak Your Mind
You must be logged in to post a comment.