Stocks slide after Bernanke details Fed plan Fed chief: Central bank likely to rein in stimulus money in coming months Market update Index Last Change % change • DJIA 10009.06 -49.58 -0.49% • NASDAQ 2137.54 -13.33 -0.62% • S&P 500 1064.18 -6.34 -0.59% Enter company symbol
updated 2 minutes ago NEW YORK - Investors are disappointed with Federal Reserve Chairman Ben Bernanke's plans to dismantle the central bank's economic supports.
The Dow Jones industrial average slipped 35 points Wednesday after jumping 150 a day earlier when hopes grew that Greece would get a lifeline to deal with its mounting debt problems.
Bernanke said in prepared remarks to a House committee that the Fed likely will begin tightening credit by raising the interest rate it pays to banks on the money they have deposited at the Fed.
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That would lead to an increase in borrowing rates for consumers and businesses. The Fed chief cautioned that the central bank is not yet ready to boost interest rates, which stand at record lows.
Bernanke released his prepared testimony although the committee canceled a planned hearing for Wednesday because of snow.
Craig Kaufman, co-founder and head of capital markets at Kaufman Bros. L.P. in New York, said the Fed's plan is reasonable and not a shift in policy. He said the market might stumble at first but that investors have known interest rates would eventually move higher as the economy strengthened.
"We're sort of in this fake world and we need to show that we're moving back to a normalized process," Kaufman said, referring to the record-low interest rates.
Bernanke's statement comes as investors await details about a potential rescue package for Greece. Officials said the European Union member nations have made no decisions about how to help the debt-burdened country, but talks are continuing. There are concerns that debt problems in Greece, Spain and Portugal would spread and upend a global economic recovery.
EU leaders and Jean-Claude Trichet, the president of the European Central Bank, are scheduled to meet Thursday to discuss the economic health of the 16 nations that use the euro.
European debt problems were the latest in a string of concerns that sent the market retreating over the past four weeks after a sharp 10-month advance. China's plans to curtail economic growth to avoid speculative bubbles and President Barack Obama's calls to curb trading by large financial institutions led to the decline.
In midday trading, the Dow fell 35.15, or 0.4 percent, to 10,023.49. The Standard & Poor's 500 index fell 4.42, or 0.4 percent, to 1,066.10, while Nasdaq composite index fell 11.67, or 0.5 percent, to 2,139.20.
News moving the markets Fed chief outlines plan to rein in stimulus aid Europe searches for way out of debt crisis U.S. trade deficit surges to $40.18 billion
Bond prices were mixed after falling the day before. The yield on the benchmark 10-year Treasury note, which moves opposite its price, was flat at 3.65 percent from late Tuesday.
The dollar rose against most other currencies. Gold fell.
In corporate earnings, The Walt Disney Co. reported fiscal first-quarter profit after the market closed Tuesday that beat analysts' expectations. The stock fell 42 cents, or 1.4 percent, to $29.42.
Two stocks fell for every one that rose on the New York Stock Exchange, where volume came to 364 million shares compared with 463.5 million shares traded at the same point Tuesday. Analysts predicted that volume would be light because heavy snow along the East Coast would keep some traders out of the market.
The Russell 2000 index of smaller companies fell 4.52, or 0.8 percent, to 590.65.
In afternoon trading, Britain's FTSE 100 rose 0.3 percent, Germany's DAX index gained 0.6 percent, and France's CAC-40 climbed 0.5 percent. Earlier, Japan's Nikkei stock average rose 0.3 percent.
