Stocks Slide Amid Dimmer Economic Outlook From Fed

FOX Business: The Power to Prosper

Wall Street ended the day in the red, with the Dow snapping a four-day winning streak, after the Federal Reserve said it expects the economy to recover at a slower pace than it initially anticipated.

Today's Markets

The Dow Jones Industrial Average was down 80.3 points, or 0.66%, to 12,110, the S&P 500 was off 8.4 points, or 0.65%, to 1,287 and the Nasdaq Composite fell 18.1 points, or 0.67%, to 2,669. The FOX 50 slipped 5.8 points to 902.

The central bank cut its view of 2011 economic growth to a range of 2.7% to 2.9% from the 3.1% to 3.3% forecast in April. The outlook for 2012 was also lowered.

Temporary factors, such as high food and energy prices and supply-chain disruptions associated with the earthquake that slammed Japan, have weighed on economic growth, according to the Fed.

Inflation, the Fed notes, has increased in recent months, but the central bank believes inflation expectations remain well controlled.  Generally, economists look to inflation expectations and not inflation readings themselves because increases in expectations are significantly more challenging to control.

Recent economic reports have shown economic growth has slowed down substantially this year, which has shaken the stock market in recent weeks.

The Fed's policy-making board has held short-term interest rates between 0% and 0.25% since 2008 in a bid to jump-start the economy.  It expects to hold rates at low levels for an extended period of time to help the economy find its footing.  The central bank also said it would end its controversial long-term treasury-buying program, QE2, by June as Wall Street was expecting.

Fed Chairman Ben Bernanke held a press conference in which he spoke on a wide range of subjects. One question market participants were paying particularly close attention to was the Fed's response to the ongoing sovereign debt situation in Europe.

Bernanke noted that money market mutual funds, which companies and individuals generally see as a slightly riskier position than cash, don't have a high exposure to European sovereign debt but do have a "very substantial exposure" to European banks.

Greece, a European Union member, has been struggling with a public debt burden of nearly $500 billion, and has already received one bailout, which proved insufficient. Euro zone ministers gave Greece a two-week deadline from this Monday to pass deeper austerity measures before it will grant it a roughly $17 billion emergency aid package.

Market participants are more confident that Greece will be able to take the necessary measures to get an emergency rescue package from the European Union and International Monetary Fund, reducing the chance the the nation will default on its debt.

The Greek Parliament gave Prime Minister George Papandreou a vote of confidence Tuesday night, though by a slim margin.

"It is now reasonable to assume that the parliament will approve the fiscal measures," economists at BNP Paribas wrote in a research note. "This in turn should pave the way for a formal approval of the disbursement at the emergency meeting of the euro zone finance minister."

On the earnings front, FedEx (NYSE:FDX) unveiled better-than-expected quarterly earnings. The worldwide shipping company said it earned $1.75 a share in its fiscal fourth quarter on $10.55 billion in revenue. Analysts forecast net profits of $1.72 a share on $10.41 billion in sales.

CarMax (NYSE:KMX) posted quarterly earnings of 55 cents a share, on revenue of $2.68 billion -- boosted by an increase in used car sales.  Wall Street expected earnings of 47 cents on $2.53 billion in revenue.

Energy markets ended the day sharply in the green.

Light, sweet crude was up $1.24, or 1.3%, to $95.41 a barrel.  Wholesale RBOB gasoline was up 9 cents, or 3.2%, to $2.97 a gallon.

Consumer gasoline prices continue on their trend lower.  A gallon of regular gas costs $3.63 a gallon on average nationwide, down from $3.84 last month, but well higher than the $2.73 drivers paid last year, according to the AAA Fuel Gauge Report.

In metals, gold was up $7.00, or 0.45%, to $1,553 a troy ounce.  Silver gained 36 cents, or 0.99%, to $36.74 a troy ounce.

The euro was down 0.25% against the U.S. dollar and the greenback edged 0.23% higher against a basket of world currencies.

Corporate News

Adobe (NASDAQ:ADBE) said after the bell Tuesday that its fiscal second-quarter profit jumped 54%, but a cautious growth forecast spooked traders, sending the stock sharply lower.

Phillip Electrics (NYSE:PHG) issued a profit warning on weak European demand, sending shares plunging.

AstraZeneca (NYSE:AZN) revealed plans to sell Astra Tech, its dental implants and medical devices unit, to Dentsply (NASDAQ:XRAY) for $1.8 billion.

Foreign Markets

The English FTSE 100 was down 0.25% to 5,773, the French CAC 40 edged lower by 0.15% to 3,871 and the German DAX fell 0.1% to 7,278.

In Asia, the Japanese Nikkei 225 soared 1.8% to 9,629 and the Chinese Hang Seng was up 0.04% to 21,860.