Bernanke Remarks Spark Selling Pressure; Dow Sheds 206 Points

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"It was all about the Fed today," summarized Schaeffer's Senior Equity Analyst Joe Bell, CMT. "[Fed Chairman Ben] Bernanke tried to calm nervous investors, but it did little to ease the volatility we've been experiencing for the past few weeks." The Dow Jones Industrial Average (DJI) traded in an extremely tight range for the first few hours of the session, until a Fed-prompted sell-off drove the index sharply lower into the closing bell.

Continue reading for more on today's market, including :

plus...
    The Fed meeting comes and goes, FedEx ( FDX ) reports earnings, and Applied Materials ( AMAT ) bulls target new highs.

For most of the day, the Dow Jones Industrial Average (DJI) drifted sideways in an extremely narrow range around the breakeven point. This sideways momentum was a distant memory by the close, however, as the index surrendered 206 points, or 1.4%, to settle at 15,112.19. This drop shifted the Dow back south of its 10-day moving average, although it did finish a hair above its 40-day trendline. All 30 Dow components finished in the red, paced by Verizon Communications (VZ), which dropped 2.9% on the day. The "best" performer was Hewlett-Packard (HPQ), which gave back less than 0.1%.

The S&P 500 Index (SPX) settled just off its intraday low, down 22.9 points, or 1.4%, at 1,628.93. Elsewhere, the Nasdaq Composite (COMP) gave back 39 points, or 1.1%, to 3,443.20. The SPX and COMP -- along with the Dow -- remain in positive territory for the week.

The CBOE Market Volatility Index (VIX) ended the near breakeven, despite the backslide in the major indices. By the close, the VIX was up a fraction of a point, or less than 0.2%, at 16.64.

CLOSING SUMMARY - INDICES

CLOSING SUMMARY - NYSE AND NASDAQ

A Trader's Take :

"The markets grinded sideways for much of the day, but as soon as Bernanke took the stage for his press conference, the selling began, sending most major sectors into the red," noted Bell. "For the most part, there was nothing unexpected said, but investors still used the event as an excuse to take some profits after yesterday's nice rally."

3 Things to Know About Today's Market :

  • The Fed meeting everyone was waiting for came and went, with few changes to existing policy -- for now. The central bank said it would continue to purchase $85 billion in bonds each month while holding the interest rate near zero. Also included in the statement, though, was the opinion that downside risks to the economy have "diminished" since last fall. In a press conference that followed the interest-rate decision, Federal Reserve Chairman Ben Bernanke confirmed expectations that so-called "tapering" of existing bond-buying efforts would likely begin toward the end of this year, assuming the economy continues to improve. (Bloomberg, CNBC)
  • Mortgage rates rose for the sixth consecutive week, climbing 2 basis points to an average of 4.17 (a 15-month high) in the week ended June 14. In response to these escalating rates, the number of new mortgage applications (for those both looking to refinance or purchase new property) dropped 3.3% last week. (CNBC)
  • FedEx ( FDX ) said fourth-quarter earnings (excluding items) hit $2.13 per share, exceeding analysts' estimates by 17 cents. Revenue edged up nearly 4% to $11.4 billion. The shipping giant is regarded as a broader barometer of global economic health, as it transports so many different types of goods across the world. (Reuters)

5 Stocks We Were Watching Today :

  1. Following its quarterly earnings report, Adobe Systems (ADBE) earned upgrades and price-target hikes from Wall Street.
  2. Put buyers wagered on a short-term pullback for Citigroup ( C ) .
  3. Alcatel Lucent (ALU) tagged a new annual peak, spurring a rash of call buying.
  4. Morgan Stanley (MS) option bulls used long calls to bet on a strong finish to the week.
  5. Call buyers expect a new high in Applied Materials ( AMAT ) shares by mid-July.

EARNINGS

For a look at today's options movers and commodities activity, head to page 2.

STOCKS - NOTABLE CALL ACTIVITY

STOCKS - NOTABLE PUT ACTIVITY

Commodities :

Oil futures declined slightly today, after the weekly inventory report revealed a slight (but unexpected) gain in supplies. July-dated crude lost 20 cents, or 0.2%, to settle at $98.24 per barrel, but futures remained active in after-hours trading as Federal Reserve Chairman Ben Bernanke addressed the press.

Gold futures closed higher ahead of the 2:00 p.m. Fed announcement, with August-dated gold adding $7.10, or 0.5%, to settle at $1,374 an ounce. After hours, the precious metal was losing ground as Bernanke's remarks resulted in a stronger dollar.

SCHAEFFER'S MARKET POSTURE



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

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This article appears in: Investing , Options

Referenced Stocks: AMAT , C , FDX , NFLX , S

Schaeffer's Investment Research

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