A weak finish to a strong start for US stocks

Minutes of last FOMC meeting take a toll on stocks

US stocks ended modestly lower on Wednesday, 20 May, 2009. US stocks managed a very strong start on Wednesday, 20 May, 2009. But by noon, stocks gave up most of their gains and were trading flat and at the end, they registered losses. It was the financial sector that gave market a solid start in the morning. But with lack of any specific news, the sector failed to continue with its momentum. Earning reports from Target and H-P checked in line with expectations. But losses picked up momentum after last Federal Open Market Committee's meeting minutes hit the wires.

Weakness in the financial sector was the main reason behind today's loss. The sector failed to lend any substantial support to the market in the course of the day. But the same sector had managed to make market make a strong start earlier.

The Dow Jones Industrial Average ended lower by 52.8 points at 8,422. The Nasdaq Composite Index, ended lower by 6.7 points at 1,727. S&P 500 ended lower by 4.6 points at 903.7. Market had opened 101 points higher earlier during the day.

Strength in the financial sector was the main reason behind today's strong open. Bank of America concluded its previously announced common stock offering, which brought in nearly $13.5 billion through the issuance of stock carrying an average price of $10.77 per share. This boosted stocks.

Home improvement retailer, Target announced its latest earnings results ahead of the opening bell today. The company reported better-than-expected earnings this morning.

In other earnings news, Hewlett-Packard posted in-line second quarter earnings and an in-line forecast for its third fiscal quarter. HP also reaffirmed an upside outlook for fiscal 2009. But the stock failed to drive the tech sector higher. Deere announced better-than-expected earnings.

The minutes from the April FOMC meeting indicated today that participants project a contraction for real GDP this year, and that committee members believe the near-term economic outlook has weakened relative to the projections made in January. However, a recovery in sales and production is still expected to begin in the second half of this year.

Crude oil prices ended higher on Wednesday, 20 May, 2009 after energy department's weekly inventory report showed more than expected drop in crude inventories for last week. The subdued dollar also led to rising crude price. On Wednesday, crude-oil futures for light sweet crude for June delivery closed at $62.04/barrel (higher by $1.94 or 3.2%) on the New York Mercantile Exchange. It was the highest level for crude in six months.

EIA reported today that crude inventories decreased by 2.1 million barrels in the week ended 15 May, 2009. Market was expecting a decline of 1.5 million barrels. Despite the decline, crude inventories, at 368.5 million barrels, were still above the upper boundary of the average range for this time of year. Refineries, meanwhile, operated at 81.8% of their operable capacity last week, slightly higher than a week ago.

In the currency market on Wednesday, the U.S. dollar index, fell more than 1%. The dollar dropped against euro for the third straight session.

Earnings and economic reports will be in focus tomorrow. Among economic report, weekly jobless claims data are due at 8:30 AM ET tomorrow morning. Leading economic indicators for April are due at 10:00 AM ET, as is the Philadelphia Fed Index.