Fed's Comments on the Economy Send Stocks Lower
Wednesday, December 13, 2006
NEW YORK, Dec. 12 -- Wall Street pulled back Tuesday, finishing slightly lower as investors grappled with an economic assessment by the Federal Reserve that warned yet again of inflation risks and reported a substantial slowing in the housing sector.
The Dow Jones industrial average was down 12.90, or 0.10 percent, at 12,315.58. Earlier in the day, it was down more than 76 points. Broader stock indicators also fell but closed above their lows as well. The Standard & Poor's 500-stock index slipped 1.48, or 0.10 percent, to 1411.56, and the Nasdaq composite index fell 11.26, or 0.46 percent, to 2431.60.
The assessment, which accompanied the Fed's widely expected decision to keep the nation's benchmark interest rate unchanged at 5.25 percent, left open the possibility that the central bank might raise rates if inflation accelerates. That disappointed some investors who were hoping for signs that the Fed was moving toward cutting rates.
Investors fear an increase could cause problems if it comes as the economy, particularly the interest-rate-dependent housing sector, is still slowing. The Fed's statement described the housing market's slowdown as "substantial," a change from past statements.
The Commerce Department reported that the trade deficit fell to $58.9 billion in October, a much bigger drop than economists were anticipating. The 8.4 percent decline from September, the biggest percentage drop in five years, was a result of moderating oil prices.
Best Buy declined $2.62, to $51.30, as its tepid third-quarter profit signaled that demand for electronics may not boost holiday sales as much as anticipated.
Goldman Sachs fell $1.56, to $200.97, as concerns arose that its performance may have peaked. Goldman's fourth-quarter profit nearly doubled on high merger-and-acquisition activity.
Nucor fell $4.75, to $59.60, after predicting fourth-quarter profit would come in far below Wall Street's expectations.
Citigroup gave up 63 cents, to $52.25, after naming a new chief operating officer on Monday. Some investors had been hoping for a large-scale management overhaul.
Yahoo gained 26 cents, to $26.75.