Bernanke Remarks Sap Traders' Glee, Stocks Fall

FOX Business: The Power to Prosper

Stocks shed morning gains and sunk into the red Thursday after Federal Reserve Chairman Ben Bernanke told lawmakers the central bank will wait to see if the economy weakens further before easing monetary policy.

Today's Markets 

The Dow Jones Industrial Average fell 54.5 points, or 0.44%, to 12,437, the S&P 500 fell 8.9 points, or 0.67%, to 1,309 and the Nasdaq Composite was down 34.3 points, or 1.2%, to 2,763. The FOX 50 slipped 3.3 points to 925.

Bernanke's comments came a day after he said the Fed stands ready to loosen monetary policy should the economy show signs of weakness. The Fed chief's more tempered analysis on Thursday helped push the dollar up, which gained 0.45% against a basket of world currencies.  Meanwhile, the euro fell 0.33% against a basket of world currencies.

JPMorgan Chase (NYSE:JPM) was the first of the largest U.S. banks to report its quarterly earnings.  The New York-based bank revealed that it earned $1.27 a share in the second quarter, a big jump from the $1.09 it earned in the same period last year.  Wall Street had forecast the company $1.21 a share.

Concerns over U.S. sovereign debt intensified after Moody's put the country's "AAA" debt rating on warning for a possible downgrade about an hour after the closing bell on Wednesday. The credit ratings company said there is an increased risk the U.S. could default on its debt if lawmakers can't come to an agreement on raising the debt ceiling -- something Congress and the Obama administration have been struggling with for weeks.

Indeed, Bernanke said a default by the U.S. would lead to a "calamitous outcome" for the economy and would amount to a "self-inflicted wound."

A lower rating for U.S. debt, analysts say, could push interest rates on U.S. bonds substantially higher.  Many financial instruments, such as credit cards and student loans, are linked to American rates, meaning there can be a cascading effect that could put the global economic recovery in jeopardy.

Data Deluge

First time claims for jobless benefits fell to 405,000 last week, from a revised 427,00 the week prior.  Economists had been expecting claims to hit 415,000.  The labor market has been a major focus among economists after the release of a dismal monthly unemployment report last week that showed the jobs market essentially stalled in June.  Weekly jobless claims have also been stuck above the 400,000-level for some time, which economists point to as a supporting moderate growth.

Prices at the wholesale level fell by 0.4% in June, a slightly bigger drop than the 0.2% economists expected. Excluding the food and energy components, prices were up 0.3% for the month, topping estimates of a 0.2% increase.  On a year-to-year basis, prices were up 7%, a smaller increase than the forecast of 7.4%.

Energy prices falling from peak levels have helped temper inflation on the producer level in the last report.  The markets will get the more closely-watched Consumer Price Index on Friday.

Retail sales ticked higher by 0.1% in June, better than the 0.1% fall economists had been expecting. Excluding the auto sector, sales were flat, missing estimates of a gain of 0.1%. Companies that have a heavy focus on retail, such as Best Buy (NYSE:BBY) and Target (NYSE:TGT), may be particularly affected by these data.

Energy markets were lower as the dollar strengthened.  Light, sweet crude tumbled $2.36, or 2.4%, to $95.69 a barrel.  Wholesale RBOB gasoline fell 3 cents, or 0.85%, to $3.12 a gallon.

Consumer gasoline prices are once again ticking higher after falling last week.  A gallon of regular costs $3.66 on average nationwide, down slightly from $3.70 last month, but well higher than the $2.71 drivers paid last year.

Gold edged higher by $3.80, or 0.24%, to $1,589 a troy ounce -- an all-time high.  Silver jumped 54 cents, or 1.4%, to $38.69 a troy ounce.

Corporate News

ConocoPhillips (NYSE:COP) unveiled plans to split into two independent, publicly traded entities by spinning off its refining and marketing operation.

Williams Companies (NYSE:WMB) boosted its bid to buy pipeline operator Southern Union (NYSE:SUG) by $5.5 billion, or nearly 13%, besting a rival offer by Energy Transfer Equity (NYSE:ETE).

Foreign Markets

The English FTSE 100 fell 1% to 5,847, the French CAC40 slipped 1.1% to 3,751 and the German DAX slumped 0.73% to 7,215.

In Asia, the Japanese Nikkei 225 fell 0.27% to 9,936 and the Chinese Hang Seng gained 0.06% to 21,940.