RTTNews - Stocks finished Wednesday's trading session modestly lower, unable to sustain earlier gains. The major averages all slipped into negative territory in mid-afternoon dealing, closing just off of their worst levels of the day.
Trading this week has been largely subdued as many traders sat on the sidelines following considerable profit taking last week, prompted by the run up in equities in recent months.
Traders digested the latest minutes of the Federal Open Market Committee released earlier this afternoon, which revealed some debate within the policymaking arm of the Federal Reserve over whether or not to purchase additional treasury securities.
Although the final decision was to stick with the $300 billion agreed on at the March meeting, in late April some officials thought that purchasing more could spur recovery.
While there was some debate over whether or not additional purchases would be needed, officials agreed that such a purchase was not warranted at that time.
Earlier, traders digested comments from treasury Secretary Timothy Geithner who issued cautious optimism regarding the recovery of the embattled financial sector, while Bank of America (BAC) was able to raise a substantial amount of capital, further bolstering prospects for the industry. The day's trading was also impacted by better-than-expected earnings from Target (TGT) and Deere (DE).
In other news, the House of Representatives passed a landmark credit card industry reform bill Wednesday afternoon, sending legislation designed to crack down on the credit card industry to President Barack Obama. The 361-64 vote sends the bill Obama's desk and he is expected to sign it as early as Friday.
The major averages all closed slightly lower a late day selloff dragged the indices into negative territory. The Dow closed lower by 52.81 at 8422.04, the Nasdaq finished down by 6.70 at 1727.84, and the S&P 500 slipped by 4.66 to 903.47.
Most Dow components dipped into negative territory late in the session, contributing to the modest pullback by the blue chip index.
The Dow was limited by shares of Hewlett Packard (HPQ), which dropped following the release of quarterly results after the closing bell on Tuesday. JP Morgan Chase (JPM) and Home Depot (HD) were also weakened on the day, falling by at least 3.2 percent.
The Dow's pullback was also mitigated by shares of General Motors (GM) which climbed by 14.1 percent. Shares of the auto giant extended their recent gains, moving further away from a low of $1.00 posted earlier this month, its lowest level since the Great Depression.
Shares of McDonald's (MCD) were able to hold on to most of their gains, closing up by 4.4 percent on the day. The advance was prompted by an upgrade from Deutsche Bank, which changed its rating from Hold to Buy on the stock of the fast food giant, following a cash flow evaluation.
With the climb, the stock has posted its highest level since mid-February, a 3-month high.
Most major sectors finished lower, helping to pull the major averages into the red on the day.
The major averages were dragged down by weakness in computer hardware stocks, with the Amex Computer Hardware Index falling by 3.2 percent.
Losses were also visible in banking and housing stocks, with the Kbw Bank Index and the Philadelphia Housing Sector Index falling by 2.8 and 2.7 percent, respectively.
Limiting the downward move on the day were gold stocks, with the Amex Gold BUGS Sector Index posting a gain of 5.1 percent on the day. The gains have put the index at its best level of the year, and its highest level since August.
Notable gains were also present in healthcare provider stocks, with the Morgan Stanley Healthcare Provider Index up by 3.5 percent on the day. The advance bolstered the index to its best level since early October.
In Focus: Geithner Comments, Corporate Earnings, Fed Buyback
Traders considered comments from Treasury Secretary Timothy Geithner who testified before lawmakers earlier, updating them on the progress of the $700 billion financial rescue plan known as the Troubled Asset Relief Program, or TARP. Geithner said that the financial system is stabilizing, and issued a timeline for further action by the Treasury.
Although stating a pick up in outlook, Geithner cautioned that it will take time for a full recovery.
The testimony came while President Obama held his first quarterly meeting with a 16 member economic advisory board, tasked with providing outside perspective for the administration.
Trader optimism picked up earlier in light of some positive news from the financial sector, as some major banks look to begin a pay back of government bail-out funds.
Relieving some of the concern about the embattled sector was Bank of America's (BAC) sale of common stock, which brought in $13.47 billion in fresh capital for the financial giant. The sale is part of the company's efforts to address a $33.9 billion capital shortfall identified by the U.S. government following the conclusion of the stress test of the nation's nineteen largest banks.
On the earnings front, discount retailer Target (TGT) reported first quarter earnings that beat out analyst forecasts by a dime. Traders have reacted positively to the earnings news, driving the stock up by 4.3 percent on the day.
Meanwhile, the world's largest agricultural equipment manufacturer Deere (DE), reported second quarter net income that edged out analyst estimates. The firm's stock advanced following the report, climbing by 2.1 percent on the session.
In other news, the New York arm of the Federal Reserve purchased $7.7 billion worth of securities with maturity dates ranging from February of 2016 to May of 2019 late in the morning. The day's buyback attracted considerably strong interest, with a total of $37.18 billion in treasuries submitted for the purchase.
Overall, the government has bought back $115.58 billion in treasuries since the program began on March 25th.
In overseas trading, stock markets across the Asia-Pacific region finished mixed on Wednesday. Japan's benchmark Nikkei 225 Index rose by 0.5 percent, while Hong Kong's Hang Seng Index fell 0.3 percent.
Meanwhile, the major European markets closed Wednesday's session mixed. The French CAC 40 Index finished up 0.8 percent, while the German DAX Index also closed up, rising by 1.6 percent on the session. On the other hand, the U.K.'s FTSE 100 Index closed down by 0.3 percent.
In the bond markets, treasuries showed moderate strength after a volatile session, surging following the release of the Fed minutes. Subsequently, the yield on the benchmark ten-year note closed down 4.1 basis points, at 3.202 percent.
Thursday, trading is likely to be impacted by the release of the weekly jobless claims report from the U.S. Labor Department for the week ended May 16th. Economists expect first time jobless claims at 640,000, following previous weekly figures which showed a decline of 637,000.
The report is set to be released at 8:30 a.m. ET.
Traders will also focus on the Philadelphia Fed's manufacturing survey for May and the Conference Board's leading indicators for April. The reports are both scheduled for release at 10:00 a.m. ET.
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