U.S. Stocks Headed to Fifth Consecutive Day of Losses After Fed Minutes
07/11/2012| 03:58pm US/Eastern
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By Jonathan Cheng
U.S. stocks headed to their fifth consecutive day of losses after the minutes of the Federal Reserve's June policy meeting showed little signs that central bankers were moving toward further action.
The Dow Jones Industrial Average fell 91 points, or 0.7%, to 12562 in late trading, putting it on track to extend its losing streak. The Standard & Poor's 500-stock index lost five points, or 0.4%, to 1336 while the Nasdaq Composite fell 27 points, or 0.9%, to 2875.
The bulk of the drop came after the release of the Fed's June meeting minutes, which showed the rate-setting committee split over the merits of further monetary easing. Some investors had been looking for clues that the Fed was leaning toward more easing, particularly after central bankers in Europe and China moved last week to cut interest rates.
"You probably want to give up on the idea that any easing is going to happen at its Aug. 1 meeting," said Michael Hood, market strategist for J.P. Morgan Asset Management. He argued that the market's expectations were unrealistic, noting that the Fed has already been "very proactive" in signaling its willingness to support the economy.
Leading the stock declines were technology and industrial stocks. United Technologies, Boeing, Microsoft and DuPont were the biggest drags on the blue-chip Dow. Offsetting those losses were gains in energy stocks as oil prices bounced back. Chevron and Exxon Mobil were among the Dow's best performers.
In global market action, stock markets in Europe finished roughly flat prior to the release of the Fed's minutes, though Spain tacked on gains after Spanish Prime Minister Mariano Rajoy announced more austerity measures in an effort to meet budget targets. The news, though expected, pushed Spain's IBEX-35 up 1.2%. Also, yields on 10-year Spanish bonds slipped below 6.6%, just two days after topping the psychologically significant 7% level.
"I don't expect any positive news out of Europe, but I don't see any subsequent bad news that we don't know already," said Omar Aguilar, chief investment officer of equities at Charles Schwab Investment Management.
Mr. Aguilar added that stocks could remain sluggish, given low expectations for U.S. corporate earnings and a cloudy economic forecast. "Retail investors continue to be very risk averse despite the positive market outcome throughout the year," he said.
Asian markets were mixed. The Shanghai Composite rose 0.5% off a six-month low, while Japan's Nikkei Stock Average slipped 0.1% to suffer its fifth consecutive loss.
Crude-oil futures soared 2.3% to settle at $85.81 a barrel, while gold futures fell to about $1,570 an ounce. The U.S. dollar gained against the yen and the euro.
In economic news, the U.S. trade deficit narrowed for a second straight month in May to $48.7 billion, in line with expectations and lower than April's upwardly revised reading of $50.6 billion. The deficit narrowed as exports picked up and falling oil prices helped drive down imports. Separately, a report on wholesale inventories for May showed a rise of 0.3%.
Shares of Adtran skidded 16% after the networking and communications equipment company missed analysts' earnings and revenue expectations.
HHGregg tumbled 36% after the appliance and electronics retailer provided a fiscal first-quarter loss outlook that was wider than current analyst projections, citing lower-than-expected revenue primarily in the video category.
Abercrombie & Fitch climbed 3.8% after the New York Post reported sources say the company may be planning a "massive" buyback of its shares.
Mead Johnson Nutrition bounced back 3.4% after a Chinese university said its accusations that the U.S. company's baby formula contained unsafe additives were false. Shares in the company had fallen 4% on Tuesday.
Prospect Capital slumped 8.2% after the company announced a public offering of 21 million shares of common stock.
Orexigen Therapeutics gained 4.4% after the company said it could complete the enrollment of patients required for a study of its obesity treatment in half the time that was originally projected.
Write to Jonathan Cheng at jonathan.cheng@wsj.com
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