Stocks Tumble After Bernanke’s Comments, FOMC Minutes Catch Wall Street Off-Guard

Michael Teague |

Ben Bernanke, Chairman of the Federal ReserveAfter the Presidents of two regional Federal Reserve banks reassured markets on Tuesday that the Fed would hold steady to its massive bond and asset purchasing program pending substantial improvements to the economy, Federal Reserve Chairman Ben Bernanke on Wednesday cattle-prodded investors with an apparent about-face.

Stocks were up on comments made yesterday by St. Louis and New York Fed Reserve Presidents James Bullard and William Dudley, who in separate public appearances maintained that the Fed’s current fiscal stimulus strategy would only be modified in accordance with improvements to specific areas of the economy such as jobs and inflation.

Bernanke’s appearance before the Congressional Joint Economic Committee redirected all of that upward momentum almost instantaneously. The Chairman essentially reiterated what his colleagues had said the previous day, that too abrupt a drawdown to quantitative easing could singlehandedly put the brakes on the current fragile economic recovery.

His reiteration that stimulus would continue until such time as the economy had been restored to a sustainable level of growth was then abruptly contradicted when responding to a question from the committee’s head, Rep. Kevin Brady of Texas.

When Brady asked if Fed spending would begin tapering by Labor Day, the Chairman replied that the rate of purchasing could begin to tighten over the course of the next few FOMC meetings.

Stocks dipped immediately, and were helped out by the subsequent release of the minutes of the most recent FOMC meeting, which appeared to confirm that the Fed was indeed getting ready to temper its purchasing in the near future, perhaps as early as June.

By closing, the S&P had dropped 0.83 percent to 1,655.35 points, with tech shares bearing the brunt. First Solar (FSLR), up some 80 percent in 2013, dropped 5.81 percent to close at $52.40. Electronics firm Amphenol Corporation (APH) was down 4.21 percent to $77.59, followed by JDS Uniphase (JDS), down 4 percent to $13.29. Other techs that dragged on the S&P included Crown Castle International (CCI), Teradata Corporation (TDC), and NVIDIA Corporation (NVDA).

Target lost 4 percent to $68.40 on an underwhelming earnings report released earlier in the day, while Netflix (NFLX) dropped 3.60 percent to $228.56 and Priceline.com Inc. (PCLN) was down 3.38 percent to $798 per share.

The Dow was down to 15,307.17 points, a loss of 0.52 percent, with Cisco Systems (CSCO) off 2.79 percent to close at $23.34. Pharmaceutical company Merck & Co. (MRK) was down 1.31 percent to $46.71, and Bank of America lost nearly 1 percent on high volume, closing the day at $13.31 per share.

The index was held up to some extent by Pfizer (PFE), up 1.81 percent to $29.30, Home Depot (HD) up 1.25 percent to $79.69 on a strong earnings report, and JPMorgan Chase & Co. (JPM), up 1.15 percent to $53.63.

The Nasdaq dropped 1.11 percent to close at 3,463.30, with losses from a number of tech shares including BlackBerry Inc. (BBRY), down 2.10 percent to $14.46, Yahoo! Inc (YHOO) down 1.70 percent to $26.54, Facebook (FB) down almost 2 percent to $25.16, and Oracle Corp. (ORCL) down 2.79 percent to $34.12.

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Companies

Symbol Name Price Change % Volume
APH Amphenol Corporation 64.98 0.48 0.74 1,707,712
BBRY BlackBerry Limited 8.33 0.45 5.71 23,407,251
CCI Crown Castle International Corp. (REIT) 94.37 -0.61 -0.64 2,649,750
CSCO Cisco Systems Inc. 31.50 0.02 0.06 15,840,958
FB Facebook Inc. 129.23 0.54 0.42 12,048,656
FRBA First Bank 8.35 -0.19 -2.22 368
FSLR First Solar Inc. 39.08 -0.01 -0.03 3,294,809
HD Home Depot Inc. (The) 128.27 1.45 1.14 5,751,066
JPM JP Morgan Chase 66.71 0.35 0.53 11,278,036
MRK Merck & Company Inc. (new) 63.30 0.73 1.17 11,794,978
NFLX Netflix Inc. 97.48 0.41 0.42 7,235,109
NVDA NVIDIA Corporation 66.78 0.24 0.36 7,994,701
ORCL Oracle Corporation 39.44 0.14 0.36 8,103,466
PCLN The Priceline Group Inc. 1,458.03 4.54 0.31 394,664
PFE Pfizer Inc. 33.99 0.16 0.47 14,307,758
TDC Teradata Corporation 30.96 0.56 1.84 1,313,099
YHOO Yahoo! Inc. 43.69 0.32 0.74 7,418,984

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