FOX Business: The Power to Prosper
The blue chips, which had traded higher much of the session, ended in the red for the fifth-straight day after Federal Reserve Chairman Ben Bernanke didn't hint at any additional quantitative easing measures.
The Dow Jones Industrial Average fell 19.2 points, or 0.16%, to 12,071, the S&P 500 was down 1.2 points, or 0.1%, to 1,285 and the Nasdaq Composite dropped 1 point, or 0.04%, to 2,702. The FOX 50 lost 2.9 points to 898.
Over the last five days, the blue chips have shed 4%. The Dow and the broader S&P 500, which is more closely watched by traders, haven't fallen for five-straight days in nearly a year.
Bernanke said the economy is growing "somewhat slower than expected," in a speech that began roughly 15 minutes before the closing bell. However, the Fed chief noted he believes the pace of recovery will pick up markedly once the impacts of the earthquake that hit Japan in March and high gasoline prices begin dissipating.
Bernanke also said there is "not much evidence" that recent inflation in energy prices are making its way into the broader price level. That means the Fed feels comfortable sticking to its accommodative monetary policy, including historically-low interest rates, unless "signs were to emerge that inflation was becoming more broadly based or that longer-term inflation expectations were becoming less well anchored."
The Fed's controversial quantitative easing program, QE2, in which it has purchased huge levels of long-term treasuries, is scheduled to end in June. The Fed has also kept short-term interest rates at historically low levels to help jump-start the economy, and Bernanke has noted repeatedly that the Fed expects to keep rates low for an extended period.
Some analysts are concerned, however, that the markets might run into trouble once the support from the Fed ends.
The dollar took a hit after a Chinese official warned of "economic and political risks in excessive holdings of the U.S. dollar," according to Reuters. The official also noted that U.S. policies might weaken the dollar and boost inflation domestically.
The greenback was recently off 0.64% against a basket of world currencies, and the euro climbed 0.77% against the dollar.
Also on the economic front, consumer borrowing rose by $6.3 billion in April following a revised $4.8 billion gain the prior month, according to fresh data from the Fed.
"Consumer credit continues to provide a picture very much in line with the U.S. economy," wrote Gregory Daco, principal U.S. economist at IHS Global Insight, in a research note. "Things are gradually improving, but this recovery is just that, a very gradual one."
Energy markets picked up late-day strength from a weak dollar and a report from Mastercard showing a 0.5% year-over-year increase in gasoline demand. Traders are also awaiting the start of the Organization of Petroleum Exporting Countries meeting on Wednesday. Energy traders will be paying particularly close attention to Saudi Arabia's oil production, according to Olivier Jakob, managing director at Petromatrix, a Swiss energy consultancy.
Jakob also notes volatility could be particularly high toward the end of the week as a result of the OPEC meeting and a European Central Bank meeting that could affect currency rates. Oil is generally very sensitive to exchange rates.
Light, sweet crude gained 8 cents, or 0.08%, to $99.09 a barrel. Wholesale RBOB gasoline jumped 4 cents, or 1.4%, to $2.99 a gallon.
In metals, gold was down $3.20, or 0.21%, to $1,544 a troy ounce. Silver climbed 26 cents, or 0.72% to $37.05 a troy ounce.
Talbots (TLB) shares plunged nearly 40% after the retailer posted first-quarter revenue that was below expectations and said it expects current-quarter revenue and profit margins to fall below the prior year.
HSBC (HSBC) agreed to pay $62.5 million to settle a case levied by the United States regarding the bank's administrative role in helping a fund place money with Bernard Madoff.
Disney (DIS) plans on cutting 200 positions in its movie studio operation, according to a report by Reuters.
The English FTSE 100 was up 0.03% to 5,865, the French CAC 40 climbed 0.22% to 3,872 and the German DAX rose 0.26% to 7,103.
In Asia, the Japanese Nikkei 225 traded higher by 0.67% to 9,443 and the Chinese Hang Seng slipped 0.35% to 22,869.