Fed Chairman Ben Bernanke disappoints Wall Street

Stocks shed all their gains following Bernanke's comments

US stocks made a modestly steady start earlier in the day rising on the back of a couple of earning reports on Wednesday, 21 July 2010. But stocks ran out of gas following Federal chairman Ben Bernanke's semi annual testimony to the Senate Banking committee. A strong finish to the prior session and a barrage of better-than-expected earnings reports benefited stocks in the early going, but the major averages lost their way since mid session hours



For the day, that ended on Wednesday, 21 July 2010, Dow ended lower by 109.43 points at 10,120.43. Nasdaq ended lower by 35.16 points at 2,187.33. S&P 500 ended lower by 13.89 points at 1,069.59. Dow's losses cumulated to 152 points following Bernanke's comments. Dow was trading higher by 11 points earlier during the day.

All ten economic sectors ended lower led by financials, healthcare and consumer discretionary sectors. Twenty-six of thirty Dow components ended lower led by Bank of America and JP Morgan Chase. Coco Cola led the pack of four Dow winners.

Fed Chairman Bernanke, made his semiannual monetary policy report to the Senate Banking Committee this afternoon. Bernanke spoke of continued uncertainty in the economy and made note of the Fed's preparations to take more policy actions as needed. The comments generally reflected the downgraded economic outlook that was communicated in the FOMC Minutes this week.

Earlier during the day, the indices sported best gains and the same came from financials, on the back of better-than-expected results from Morgan Stanley, Wells Fargo and US Bancorp ahead of the adoption of new financial regulation into law. But United Technologies became a drag on the industrial sector when the Dow component succumbed to selling as participants shrugged off the better-than-expected bottom line.

Fellow Dow component Coca Cola also bested earnings expectations, but it shares were able to hold their gain into the close. The company reported selling more soft drinks and juices in every part of the globe other than Europe during the second quarter.

In the technology sector, Yahoo! reported a rather unimpressive revenue figure that overshadowed its upside earnings surprise. Better-than-expected earnings from Apple provided some support, though.

In the currency market on Wednesday, the dollar index, which measures the strength of the dollar against a basket of six other currencies rose by 0.6%.

Crude oil prices ended lower on Wednesday, 21 July 2010 at Nymex. Prices fell as energy department reported a sudden buildup in crude stockpiles for last week while traders had anticipated the report to show a drop. Prices also fell following Fed chairman Ben Bernanke's semi annual comments on the US economy. On Wednesday, crude oil futures for light sweet crude for September delivery closed at $76.56/barrel (lower by $1.02 or 1.3%). During intra day trading, prices fell to a low of $76.44 and rose to a high of $78.61.

In the latest inventory report, the EIA reported today a rise of 400,000 barrels of oil for last week, although a sizeable decrease had been widely expected. The report also showed that gasoline inventories rose 1.1 million barrels and stockpiles of distillates, which include diesel and heating oil, rose 3.9 million barrels. Market had expected an increase of 1 million for gasoline stocks and 1.6 million for distillate stocks.

Among other energy products on Wednesday, reformulated gasoline for September delivery, the most active contract, fell to $2.06 a gallon from a previous settlement of nearly $2.08 a gallon. September heating oil, also the most active contract, declined more than 3 cents, or 1.7%, to just below $2.02 a gallon.

On Wednesday, natural-gas futures for September delivery settled down nearly 8 cents, or 1.7%, at $4.50 per million British thermal units. The EIA is scheduled to report on natural-gas inventories on Thursday morning.

Bullion metal prices ended mostly higher on Wednesday, 21 July 2010 at Comex. Gold prices remained almost unchanged while silver prices rose. On Wednesday, gold for August delivery ended at $1,191.8 an ounce, higher by a dime an ounce on the New York Mercantile Exchange. September Comex silver futures ended higher by 11 cents (0.6%) at $17.8 an ounce.

For every share on the rise, more than two were falling on the New York Stock Exchange, where trading volume topped 1.2 billion.

Barring MTNL, all Indian ADRs ended lower on Wednesday. Dr Reddys and Patni Computers were the main losers shedding 3.4% and 1.5% respectively.

A number of earning reports are expected tomorrow. Initial claims and continuing claims are the economic data expected.