Lingering economic uncertainties kept stocks under pressure for the fourth straight day on Wednesday even as minutes from the Federal Reserve’s last policy meeting showed the economy is slowly turning a corner and inflation is likely to remain restrained. Trading was mostly rangebound as investors chose to remain on the sidelines. As investors went into risk-aversion mode, Treasuries jumped and corresponding yields declined, with the yield on the 10-year tanking to its lowest in more than seven weeks.
Trading may remain subdued as the Labor Day weekend approaches. Nevertheless, today’s trading could benefit from last afternoon’s optimistic FOMC minutes coupled with improved growth expectations from the Organization for Economic Cooperation and Development and Chairman of China’s Securities Regulatory Commission advising regulators will promote stable markets. China’s Shanghai Composite Index jumped 4.8% in an otherwise normal day for Asian bourses. This morning’s stock futures are pointing to a higher opening on the Wall Street as investors turn their focus towards reports on jobs and consumer spending.
Yesterday, the 30-stock Dow Jones industrial average retreated 30 points, or 0.3% and the S&P 500 index slid 3 points, or 0.3%. The Nasdaq composite edged up a paltry 2 points, or 0.2%. During the last three sessions, the DJIA has lost almost 270 points. On the NYSE, volume slowed to 1.38 billion shares and declining stock beat those that advanced three to two. Gold prices jumped 2.3% to $978.50.
The decline was broad based as all but six DJIA components declined. Those leading the Dow lower were Merck & Co. (NYSE:MRK), which declined 3.1% to $30.81 and JP Morgan (NYSE:JPM), which closed down 1.9% to $40.86. Coca-Cola (NYSE:KO) and Cisco Systems (NASDAQ:CSCO) were the leading gainers, rising 2.62% and 1.8%, respectively. Alcoa (NYSE:AA) eased 0.4%. The company said it sees an 8% aluminum demand growth for the second half, due to China’s stimulus measures.
The FOMC report released last afternoon showed the economic recovery will likely start gaining momentum in 2010, although there still remains “considerable uncertainty” about its pace. The report noted inflation is likely to stay subdued over the next few years, with some pointing to risks of “substantial disinflation.”
Chain store comparable sales reports could be of importance in today’s trading, especially considering the recent spike in shares of retailers. Early to report, Costco (NASDAQ:COST) announced a 2% drop in monthly sales. Wet Seal’s (NASDAQ:WTSLA) same-store-sales fell 11.2% in August; Children’s Place (NASDAQ:PLCE) sales dropped 8%; Limited Brands (NYSE:LTD) fell 4%.
