Stocks remained under pressure as investors weighed Federal Reserve Chairman Ben Bernanke’s plans to withdraw the emergency measures that have kept the economy afloat, and tighten borrowing costs. However, the fall was restrained as hopes grew European Union will pull Greece from the brink of default.
Prepared testimony from Fed Chairman Bernanke indicated an interest rate hike was inevitable, even as questions remained on the timing, as “extended period” language was maintained. Nevertheless, analysts anticipate higher overnight lending rates of 0.5% from its current range of 0-0.25% in the third quarter.
Although economic data have pointed towards a steady recovery taking shape, investors have preferred to wait and watch over the last four weeks and sold off stocks. Fears of contagion from European debt situation have led to a heightened selling and given investors sufficient rationales to not extend last year’s 23% equity gains.
This morning’s pre-market futures suggest Wall Street would open with gains as European Leaders have reached a deal to help Greece. Adding to the positive sentiment is a Labor Department report that says new claims for employment benefits fell more than expected.
Yesterday, the DJIA, which was down almost 100 points during the session, closed off 20 points, or 0.2%, at 10,038. The S&P 500 closed off 0.2% at 1,068, hurt by weakness in all ten industry sectors. NASDAQ shares eased 0.1% to close at 2,148. Volume on NYSE slowed to 0.920 billion shares, as advancing shares were slightly ahead of decliner.
Among the ten S&P500 industry sectors, financials dropped 0.8%; basic materials and utilities lost 0.6%; oil and gas and health care and telecommunications dropped 0.5%; consumer services shed 0.4%; and industrials, consumer goods, and tech eased 0.3%.
US treasuries were down, with the price of the 10-year off 13/32 as its yield rose to 3.690%. Meanwhile, the Treasury’s $25 billion auction of 10 years met with weak demand. With a high yield of 3.692%, its bid-to-cover ratio was a well-below-average 2.67. The dollar rose 0.3% against a basket of currencies and gold prices eased 90 cents to $1,076.30.
