Federal Reserve Chief Ben Bernanke helped to bolster the market yesterday, and just as easily, ended any momentum bulls were building as he told Congress today that the Fed is not ready to take any immediate actions to help stimulate the economy. Bernanke also warned that a default in U.S. debt could be devastating to the economy, and any drastic budget cuts could derail the fragile recovery effort. There’s nothing really there that hasn’t been expressed by other notable market commentators, but it was enough to scare Wall Street into losses. Stocks had showed gains in early trading with the U.S. Labor Department reporting that jobless claims applicants dropped to 405,000 last week, the lowest level in about three months. Initial jobless claims are still numbering over 400,000 for the past 14 weeks, and is still considerably off from the 375,000 threshold that indicates a healthy job market. Oil prices are down 2.5 percent and gold continues edge higher into record levels.
Major U.S. Stock Indices
DJIA: 12,421.64 (-0.56 percent)
S&P 500: 1,307.04 (-0.81 percent)
NASDAQ: 2,758.00 (-1.39 percent)
Russell 2000: 823.57 (-1.60 percent)
In other news:
- Google’s (GOOG) new social networking venture took about $200 million off of second quarter profits. The web search giant is no stranger to spending a lot of cash on new projects. [Bloomberg]
- China, the largest holder of U.S. debt, urges the U.S. to not default on its debt. [NY Times]
- JPMorgan (JPM) CEO says that a U.S. default could actually help to boost profits for his firm, though it’s not exactly something he’s rooting for to happen. [The Street]
- In an effort to convince the market that its not in jeopardy, Italy says it plans to strengthen its austerity measures to show that the EU’s third-largest economy will not be swallowed by the financial crisis. [AP]
- Moody’s (MCO) warned yesterday that it may downgrade the U.S.’s credit rating. Wall Street and investors shrug, look on. [WSJ]
Check back as more news develops.