Closing Bell: Stocks Edge Lower as Investors Ponder Economy's Strength

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Richard Drew/AP
Stocks pulled back slightly Thursday following the Federal Reserve's surprise decision Wednesday to maintain its stimulus program, leaving investors to ponder just how weak the U.S. economy is.

The Dow Jones industrial average (^DJI) lost 40 points, or 0.3 percent, to 15,636, the Standard & Poor's 500 index (^GPSC) slipped 3 points, or 0.2 percent, to 1,722, but the Nasdaq composite index (^IXIC) -- which unlike the other two, did not set a new record Wednesday -- edged up 5 points, or 0.2 percent, to 3,789.

The Fed voted Wednesday to continue its $85 billion-a-month bond-buying program at full strength. The decision was a surprise because Bernanke and other voting members of the Fed had telegraphed over the summer that the central bank was considering pulling back as the economic recovery picks up speed.

The decision to leave the current stimulus suggested to some investors the economy is weaker than previously thought, though a number of economic reports released Thursday suggested that wasn't the case.

The National Association of Realtors reported existing home sales surged in August to a 6½-year high, while a report from the Federal Reserve Bank of Philadelphia showed factories grew busier in the Mid-Atlantic region this month -- both signs that rising borrowing costs are weighing only modestly on the economy.

In yet another indication the economy is shrugging off higher borrowing costs, an index of U.S. leading indicators from the Conference Board advanced by a greater-than-expected 0.7 percent in August.

Some economists, however, feel it is just a matter of time before the spike in mortgage rates hits the housing market harder. Already, new home construction has looked wobbly. Citing lower demand for mortgage refinancing due to higher interest rates, Wells Fargo (WFC) said it was laying off 1,800 workers in its home loan business.

A separate report from the Labor Department showed the number of initial claims for state unemployment benefits last week held near its lowest levels since before the last recession began in December 2007. A Labor Department analyst said California and Nevada still appeared to be working through a backlog of new claims, however, making it hard to get a clear read on the health of the labor market.


Yet another report highlighted how much an increase in American exports is helping the global economy achieve a more healthy balance of trade and money flows. The current account deficit, a broad measure of the flow of goods, services and money across national borders, dropped to $98.9 billion in the April-June period from a revised $104.9 billion in the prior period.

After climbing Wednesday following the Fed's announcement, oil prices edged lower Thursday. Benchmark crude fell 1.6 percent to $106.39 a barrel. But the price of gold continued to climb, surging 4.7 percent to $1,369.30.

JPMorgan Chase, the biggest U.S. bank, will pay about $920 million in penalties to regulators in two countries to settle some of its potential liabilities from its $6.2 billion "London Whale" derivatives loss last year, according to terms made public Thursday. JPMorgan (JPM) shares lost 1.5 percent to close at $52.80.

More Stocks in the News:
  • ConAgra Foods (CAG), whose many brands include Chef Boyardee and Marie Callender's, slumped 3.9 percent to $30.82 after the company's income fell short of analysts' expectations. The company also cut its outlook for 2014.
  • Rite Aid (RAD) rocketed up more than 23 percent to $4.58, after the drug store chain reported an unexpected second-quarter profit. It also raised its profit forecast for fiscal year 2014.
  • Agilent Technologies (A), which makes scientific instruments, gained 3.4 percent $50.98 after announcing a spinoff of its electronic measurement business.
  • Shares of Tesla Motors (TSLA) hit a record high, boosted in part by an upbeat note from analysts at Deutsche Bank. Shares of the electric car maker hit $179.40 and ended Thursday trading up 7 percent to $177.86.
  • Oracle (ORCL) forecast sales and profit for its second quarter that fell short of expectations as it continues to battle soft global IT demand and smaller rivals. Still, its shares inched 0.2 percent higher to $33.93.
What to Watch Friday:
  • Darden Restaurants (DRI) reports quarterly corporate earnings.
  • Esther George, president of the Federal Reserve Bank of Kansas City, speaks on the economy to the Shadow Open Market Committee in New York at 12:30 p.m. Eastern time.
-Compiled from staff and wire reports.

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15 Comments

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Bob

Well they should be fretting and sweating. The economy is being propped up by the 85 billion purchase of bonds by the government each month. We are 17 trilliion in debt and adding to that number. Millions who want to work are unemployed, one in six living in poverty, 50 million on food stamps. The stock market is being manipulated by the big boys now. The small investor got his ass handed to him years ago and most will not venture into that high stakes game again.
It is amazing how the stock market can even be in the green.

September 20 2013 at 7:55 AM Report abuse +2 rate up rate down Reply
bowzer1

What an asinine headline and an asinine bunch of comments. The stock market is at an all time high! I"ve been in it for 40+ years. It NEVER goes straight up. You really think that going down 40 points from an all-time high means "investors are pondering the economy's strength?" It means NOTHING but that some people cashed out. Talk about reading into things...

September 20 2013 at 12:47 AM Report abuse -2 rate up rate down Reply
1 reply to bowzer1's comment
crazychris379

the only reason its at an all time high is QE1 & QE2 & ...
once the printing presses get turned off the market will instantly crash

September 20 2013 at 7:47 AM Report abuse +1 rate up rate down Reply
jjfarino

This cracks me up, stock rise when the Feds announce they have no plans to scale back QE2 but then stocks drop the next day when people figure out that the reason the Feds are continuing to buy bonds is because the economy still sucks.

September 19 2013 at 10:24 PM Report abuse +3 rate up rate down Reply
SPQR

we can't make it on cumsumerism unless we buy our products that WE make here in the US.

I will see you all in the FEMA camps soon! we can share some Chef Boyardie

September 19 2013 at 6:43 PM Report abuse +4 rate up rate down Reply
burkco57

There is no economic strength. This country was lost in 1913 when the Federal Reserve was established. It was unrecoverable when we were taken off the gold standard. And now, with unlimited money printing and an entire government that is clueless and unconcerned about the people there will be no turning back. No fiat currency system can go on forever. No government that is out of control can be reigned in. It is hopeless.

September 19 2013 at 6:29 PM Report abuse +3 rate up rate down Reply
1 reply to burkco57's comment
Hello Bob

Burkco, the United States has done reasonably well over the last 100 years despite depressions, recessions, wars and hundreds of natural disasters. I don't think the Federal Reserve has had any material detrimental effects on the American economy and in all probability has had a significant stabilizing effect. In short, I don't think you have a clue .

September 19 2013 at 7:01 PM Report abuse rate up rate down Reply
1 reply to Hello Bob's comment
betty_brock

We're way too far in debt this time, Bob.

September 19 2013 at 8:07 PM Report abuse +3 rate up rate down
dsb1252

This is F'ing ridiculous. The market took a dive because someone (Wall Street) thought the Fed was going to back what they are doing because the economy is not that strong. So the Fed says not so. The market shoots up. Now the market takes a hit because Wall Street thinks the economy is not so strong. Guess who make the money when the market goes up or down? It sure as hell is the guys with the 401's.

September 19 2013 at 6:15 PM Report abuse +1 rate up rate down Reply
2 replies to dsb1252's comment
SPQR

not the 401s

September 19 2013 at 6:41 PM Report abuse rate up rate down Reply
Chad Griffin

Do you have any clue. 401 's make up a morsel of the market share. It is nothing but fat cat's that make money of dividends and cash out almost tax free. I try to make up with my low paying job by doing overtime ALL the time.I grossed 88,000 and my tax guy explained to me after all my taxes last year I survived off only 33000 dollars. If that's not holding down the middle class I dont know how to win at monopoly If all the pieces are already owned.What AM I gonna do with my 33000 other than pay bills and buy food. Please remember I'm almost never home to work on my own next great idea.And my fiance is training to be a Activities director which is another bill and 0 income plus daycare for the kid while she attends school.

September 19 2013 at 8:19 PM Report abuse +1 rate up rate down Reply
joejoegolfn

The economy is not as strong as they thought? Really? What clues do you have? Is it the 1.02 trillion dollars the fed is printing and dumping in the stocks and bonds for the rich to get richer on the backs of the poor? Or is the that 95 percent of new jobs in the US in the last year are part time? Maybe it's the 90 million people who are not in the workforce. Could it be food stamp recipients have gone up by 28 million in 4 years. Could be 7 million more people in poverty. Maybe not . One day they will figure it out

September 19 2013 at 5:57 PM Report abuse +4 rate up rate down Reply
hsstempe

somebody let the cat out of the bag and told them the feds are printin money! dang!

September 19 2013 at 5:16 PM Report abuse +1 rate up rate down Reply
juststeve35

Why?

Is it suddenly weaker than just the other day when it shot up to new heights??

Or is this more likely a drop caused by the speculators taking the profits they earned in that same rise???

September 19 2013 at 4:42 PM Report abuse +5 rate up rate down Reply
1 reply to juststeve35's comment
chuckhalper

I think you are right. Profit taking after a two day run. Fretting is the reason? Geez, who writes this stuff?

September 19 2013 at 5:15 PM Report abuse +3 rate up rate down Reply