US Market plunges after hawkish statements from Federal Reserve

US Market witnesses biggest two day loss in two weeks as Federal Reserve Chairman speaks

Did the Fed fool the market previously? Today, Fed Chairman Ben Bernanke’s hawkish comments seem to indicate that. Also, a weaker-than-expected durable goods report dampened hopes that business spending would help stave off a housing-led economic slowdown. That along with Ben Bernanke's stance that Fed policy is still oriented toward inflation control, weighed on market sentiment for the entire day. Higher crude prices amid rumours of a military altercation with Iran in the Persian Gulf just worsened the situation further. Dow, was at a time, trading 140 points lower but recovered a bit before going to close. The Dow's decline was its third-straight this week.

29 out of 30 stocks closed lower for the day. For the day (28 March, Tuesday) the Dow Jones Industrial Average closed lower by 96.33 points at 12300.36, Nasdaq lower by 20.33 points at 2417.1 and S&P 500 lower by 11.39 points at 1417.22. Altria was the sole major Dow winner. It rose 1.3% after Goldman Sachs added the stock to its conviction buy list. Boeing, Wal-Mart, General Motors and United Tech were the major Dow laggards.

Durable Orders report starts day in a bad tone

The stock market started the day on a negative note with the early slide driven by an increase in oil prices. Separately, the durable orders report for February was on the weak side with non-defense capital goods orders, ex-transportation (a proxy for business investment) declining 1.2% after a 7.4% decline in January. The financial and consumer discretionary sector were pacing the declines for the broader market.

Then at 10.30 ET, the chairman of the Federal Reserve reiterated concerns about inflation and dampened investor hopes that weaker growth would soon push the Fed closer to cutting interest rates. According to him, “Recent levels of inflation, have been somewhat elevated, and the level of core inflation remains uncomfortably high”. But, Wall Street did not like Fed’s comments today and stocks plunged.

Crude futures kiss $64/barrel after trading at $68 on late electronic trading

From a sectoral standpoint, banks and brokers were the main losers for the day while oil and metal-miners were the winners. Telecom services joined with financials led the list of losers, but the technology, industrial and consumer discretionary sectors were among the more influential loss leaders.

Trading volumes were light with 1.522 billion shares changing hands on the New York Stock Exchange and 1.905 billion shares trading on the Nasdaq stock market. Declining issues outpaced gainers by 21 to 11 on the NYSE and by 19 to 9 on the Nasdaq.

Crude-oil futures for light sweet crude for May delivery closed at highest level of the year till date at $64.08/barrel (higher by $ 1.15/barrel or 1.8%) on the New York Mercantile Exchange. Prices increased after tensions between Iran and the U.K. ignited concerns about supply disruptions in the Persian Gulf. On an intra day level, the contract traded as high as $64.85/barrel. The contract touched a 6-month high of $68.09 in electronic trading late Tuesday, more than $5 above its regular-session closing price Tuesday of $62.93.

For tomorrow, investors will look for economic data to help set the tone of trading. After Labor Dept.'s weekly jobs report before market opens, final read on Q4 GDP and Chain Deflator are also to be released tomorrow