Wednesday was a good day on Wall Street until Ben S. Bernanke uttered two words: “unusually uncertain.”
That cautious assessment of the economy from Mr. Bernanke, the chairman of the Federal Reserve, sent the stock market into an afternoon slide that underscored investors’ fragile confidence. While Mr. Bernanke’s views, delivered during his twice-yearly testimony before Congress, were largely in line with previous statements from the Fed, his testimony nonetheless sent the broad stock market down nearly 1.3 percent.
“The market seemed to focus on that ‘unusually uncertain’ comment a minute or so in and we never recovered,” said Phil Orlando, chief equity market strategist at Federated Investors. “And then it got progressively worse from there.”
Mr. Orlando continued: “Investors are just very nervous right now.”
The Dow Jones industrial average closed down 109.43, or 1.07 percent, at 10,120.53. The broader Standard & Poor’s 500-stock index was down 13.89 points or 1.28 percent at 1,069.59, and the Nasdaq composite index fell 35.16 points or 1.58 percent, at 2,187.33.It was a quiet day until Mr. Bernanke began to speak at about 2 p.m. Then, as his testimony got underway, stocks ground progressively lower.
The passage that seemed to unnerve investors the most was this: “Of course, even as the Federal Reserve continues prudent planning for the ultimate withdrawal of extraordinary monetary policy accommodation, we also recognize that the economic outlook remains unusually uncertain.”
For the stock market, that was all it took. Andrew Pusateri, an analyst with Edward Jones, said it appeared the market had a change of heart because of the remarks about uncertainty and the possibility of needing future steps to bolster the economy.
“I think he is saying that more or less without extra measures we would slide back into a double dip,” he said. “I think that is the fear.”
Before Mr. Bernanke’s comments, investors had reacted cautiously Wednesday despite corporate earnings reports that, in better times, might have been reason for optimism.
But Mr. Orlando said many believe the latest quarterly results were “baked into the cake.” What matters is where the economy and corporate profits go from here.
“It is the next 6 months or 12 months that we are worried about,” he said.
John Canally, economist for LPL Financial, said he thought the market was unusually jumpy as it continued to field discouraging data on housing, unemployment, consumer sentiment and bank lending.
“The market is a little spooked by the fact that the Fed is a little uncertain,” he said.
Financial stocks — where were up in early trading, despite lingering uncertainty over the impact of the sweeping financial legislation signed by President Obama Wednesday — sank more than 1 percent. Five other industry groups also fell that much.
Two big banks, Morgan Stanleyand Wells Fargo, reported results that topped analysts’ forecasts.
Morgan Stanley closed up $1.58 at $26.80. Wells shares were up 15 cents at $26.06.
Earnings from Apple and Coca-Cola also beat expectations. Apple closed $2.35 higher at $254.24. Coca Cola shares rose 84 cents at $54.08
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