Stocks fall, Google drives down Nasdaq
NEW YORK » Stocks ended a lethargic session moderately lower yesterday as a lack of economic news returned investors' focus to interest rates and inflation ahead of comments from new Federal Reserve Chairman Ben Bernanke later this week.
Reports that Merrill Lynch & Co. is in talks to buy nearly half of BlackRock Inc. drew a positive reaction from the market, but an article warning of intensifying competition for Google Inc. saddled the tech sector and sent the Nasdaq composite index sliding about 1 percent.
Trading was quiet while investors anticipated Bernanke's first testimony before Congress tomorrow, said Jack Ablin, chief investment officer for Harris Private Bank. Many thought January's interest rate hike would be the last for a while, but recent signs of economic growth have renewed debate over whether the Fed will go further to stifle inflation, he said.
"Right now, the transparency we had with (former Chairman Alan) Greenspan is gone. We're trying to get some semblance of which way the Fed is going to go," Ablin said, adding that a strong first-quarter gross domestic product figure would likely guarantee another rate increase at the Fed's May meeting.
At the close of trading, the Dow Jones industrial average declined 26.73, or 0.24 percent, to 10,892.32.
The broader stock indicators also moved lower, with the Nasdaq dropping 22.07, or 0.98 percent, to 2,239.81. The Standard & Poor's 500 index lost 4.13, or 0.33 percent, to 1,262.86.
Bonds were flat although the yield curve remained inverted, with the 10-year Treasury note yield unchanged at 4.58 percent and the two-year Treasury yield down slightly at 4.67 percent. The inversion signals a lack of short-term confidence and has preceded economic recessions six of seven times in the past, Ablin said.
Energy prices slumped despite a heavy weekend snowstorm that blanketed the northeastern states, a major consumer of heating oil.
A barrel of light crude lost 60 cents to settle at $61.24 on the New York Mercantile Exchange.
Investors will be closely monitoring Bernanke's testimony for his perspective on economic growth and inflation, which could exacerbate the response to wholesale price data -- seen as a precursor to consumer-level inflation -- when those numbers are released Friday, said Rick Pendergraft, equity trader for Schaeffer's Investment Research.
Other data slated for this week include retail sales, manufacturing activity, housing orders and consumer confidence.