RTTNews - Following two days of steep losses, stocks saw a lackluster outing on Wednesday, with the major averages finishing on opposite sides of the unchanged line. The lack of conviction came amid low volume and mixed trader sentiment regarding near-term economic prospects and proposed financial system reforms from the Obama administration.
Seeking to prevent a recurrence of the financial meltdown that sunk the U.S. economy into a recession, President Barack Obama laid out a sweeping agenda for regulatory reform earlier this afternoon.
The president proposed granting the Federal Reserve the authority to scrutinize firms that are large enough to pose a systemic risk to the financial markets.
In addition, Obama called for the creation of an oversight council of existing federal regulators to share information, identify gaps in regulation and tackle issues that don't fit neatly into an organizational chart.
Obama also called for the creation of a new agency dedicated to looking out for the interests of consumers in the financial markets.
Earlier, traders digested a report on consumer prices from the Labor Department that showed a modest increase in the month of May, with the mild price growth coming in below the expectations of economists.
The report showed that prices edged up 0.1 percent in May after coming in unchanged in April. Economists had been expecting a somewhat more substantial increase in prices of about 0.3 percent.
Core consumer prices, which exclude food and energy prices, also edged up 0.1 percent in May following a 0.3 percent increase in April. The modest increase in core prices came in line with economist estimates.
In other news, the Federal Reserve continued its treasury buyback program Wednesday, completing its second quantitative easing move of the week. The New York Federal Reserve purchased $7.0 billion worth of securities with maturity dates ranging from May of 2016 to May of 2019.
The day's buyback saw a total of $26.2 billion in treasuries submitted for the purchase. Overall, the Fed has purchased a total of $169.97 billion since the program began on March 25th.
The major averages ended the session mixed, largely unable to hold onto their earlier gains. While the Nasdaq finished higher by 11.88 points or 0.7 percent at 1,808.06, the Dow slid 7.49 points or 0.1 percent to 8,497.18 and the S&P 500 dropped by 1.26 points or 0.1 percent to 910.71.
The major sectors turned in a roughly mixed performance on the day, contributing to the lack of direction that was shown by the broader markets.
Some of the day's most disappointing performances came from banking stocks, with the S&P Banks Index falling by 4.0 percent on the day. The day's pullback dragged the index down to its worst closing level in over six weeks.
The decline came as 22 banks saw their credit ratings lowered at Standard & Poor's, while concern that the Obama administration's reform plans could adversely affect the financial services industry also drove banking stocks lower.
Oil service and steel stocks also retreated on the day, with the Philadelphia Oil Service Index and the NYSE Arca Steel Index dropping by 2.8 percent and 2.0 percent, respectively. With the decline, both indices fell to their worst closing levels in three weeks.
While weakness was also visible among brokerage, real estate and natural gas stocks, airline stocks posting notable gains, driving the NYSE Arca Airline Index up 2.5 percent. The index was led higher by UAL Corp (UAUA), which rose by 4.2 percent, climbing further off of its worst closing level in over three months set on Monday.
Pharmaceutical and health insurance stocks also turned in strong performances, with the NYSE Arca Pharmaceutical Index and the Morgan Stanley Healthcare Payor Index rising by 1.9 percent and 1.2 percent, respectively.
Despite the pullback by the blue chip index, a majority of the Dow components finished in positive territory.
Pfizer (PFE) and Home Depot (HD) posted strong gains, closing up 3.0 percent and 1.9 percent, respectively. The upward moves helped the stocks offset some of their recent losses.
A resurgence in shares of Intel (INTC), Hewlett Packard (HPQ) and Merck (MRK) also helped to limit the loss posted by the blue chip index.
On the other hand, notable weakness was visible in shares of General Electric (GE), which declined by 4.2 percent on the day. With the drop, shares of the diversified conglomerate finished at their worst price in seven weeks.
The Dow was also hurt by financial service stocks, with Bank of America (BAC), American Express (AXP) and JP Morgan Chase (JPM) all dropping by at least 2.3 percent on the session.
As discussed earlier, the move in financials was prompted by concern over the financial reforms proposed by the Obama administration.
In overseas trading, stock markets across the Asia Pacific region ended Wednesday's trading on a mixed note. Japan's benchmark Nikkei 225 Index closed up 0.9 percent, while Hong Kong's Hang Seng finished down 0.5 percent.
Meanwhile, the major European markets all closed firmly in the red, with the French CAC 40 Index and the German DAX Index falling by 1.6 percent and 1.9 percent, respectively. The U.K.'s FTSE 100 Index also finished notably lower, dropping by 1.2 percent.
In the bond markets, treasuries finished in positive territory, although well off of their best levels of the day. Subsequently, the yield on the benchmark ten-year note closed at 3.647 percent, down by 2.7 basis points on the day.
On Thursday, trader sentiment is likely to be impacted by a Labor Department report on jobless claims for the week ended June 13th. Economists expect the report to show first time claims at 602,000, compared to the 601,000 reported for the previous week. The data is scheduled to be released at 8:30 a.m. ET.
Traders will also look to the Conference Board's leading economic indicators index for May and the Philadelphia Federal Reserve's reading on manufacturing activity for June, with both expected to show a modest improvement. The reports will both be released at 10:00 a.m. ET.
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