Mr. Bernanke, in comments before the Economic Club of New York, said that the Fed did not have the ability to offset the damage that would result if politicians failed to reach a deal to prevent a series of mandatory tax increases and spending cuts scheduled to go into effect early next year.
His statement caused a downdraft in the market, though the equity market cut most of its losses before the end of the day.
“This is a more realistic and pragmatic picture of where we are, compared to what we’ve been hearing for the past couple of days from politicians,” said James Dailey, portfolio manager at TEAM Asset Strategy Fund in Harrisburg, Pa.
Stocks rallied for the last two sessions after Washington politicians sounded an encouraging note that a deal on fiscal issues could be reached. Those two days of gains came after two weeks of sharp losses that pushed the Standard Poor’s 500-stock index down through the 200-day moving average, a crucial benchmark of the market’s long-term trend. The S. P. ended Tuesday near that level, which was 1,382.68.
The Dow Jones industrial average slipped 7.45 points, or 0.06 percent, to close at 12,788.51. But the S. P. 500 and Nasdaq each rose, albeit barely. The S. P. gained 0.07 percent, to 1,387.81. The Nasdaq composite index rose 0.02 percent, to 2,916.68.
The day’s biggest disappointment was Hewlett-Packard, whose stock sank to a 10-year low after the company swung to a fourth-quarter loss and announced a $5 billion charge related to “accounting improprieties.” H.P. stock slid 12 percent to close at $11.71.
H.P., whose stock is one of 30 on the Dow, said it took an $8.8 billion charge in the quarter, with $5 billion related to its acquisition of the software maker Autonomy, citing “serious accounting improprieties.” H.P.’s market value is now $23 billion, compared with $100 billion just two years ago.
Shares of Best Buy fell 13 percent after the company reported a net loss of $13 million for the third quarter on weaker-than-expected sales at its established stores.
Another factor weighing on stocks was the reduction of France’s sovereign rating by Moody’s Investors Service, a move announced after the market’s close on Monday. Moody’s cited an uncertain fiscal outlook as a result of the weakening economy.
“This brings forward a whole new set of problems to the euro zone issue,” Mr. Dailey said. “When the lifeguards — in this case, Germany and France — are in trouble, when they need to save people like Greece and Spain, that could be a big concern.”
Also on Tuesday, data showed that United States housing starts rose to their highest rate in more than four years in October, suggesting that the housing market’s recovery was gaining momentum, even though permits for future construction fell. An index of housing-related shares shot up 2.5 percent.
Advancers outnumbered decliners on the New York Stock Exchange by a ratio of about 4 to 3. On Nasdaq, the opposite trend took hold, with about 13 stocks falling for every 12 that rose.
The Treasury’s benchmark 10-year note fell 16/32, to 99 20/32, and the yield rose to 1.67 percent, from 1.61 percent late Monday.
Article source: http://www.nytimes.com/2012/11/21/business/daily-stock-market-activity.html?partner=rss&emc=rss
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