US stocks fall as Wall Street seeks clues about economy

Financial stocks led a pullback on Wednesday (Feb 25) on Wall Street as investors looked for clues about the economy after two back-and-forth days in the market, the Associated Press reported. 

The market is awaiting a second day of testimony from Federal Reserve Chairman Ben Bernanke before Congress. Investors are also waiting for January home sales figures to be released early in the session. 

Bank stocks fell amid continued uneasiness about the steps the government will take to help struggling financial companies. The Obama administration is planning to begin “stress tests” on the nation’s biggest banks Wednesday to determine how they would fare if the recession deepened. 

Banking regulators plan to examine the financial well-being of Citigroup Inc., Bank of America Corp. and more than a dozen other institutions that have received money from the government’s $700 billion bailout fund. The tests are designed to help determine whether banks have enough capital to endure any further bumps in the economy during the next two years. 

Bernanke will be on Capitol Hill again Wednesday as he appears before the House Financial Services Committee. His testimony will be identical to what he delivered to the Senate on Tuesday but the questions he faces likely will differ. 

In the first hour of trading, the Dow Jones industrial average fell 85.39, or 1.16 percent, to 7,265.55. Broader stock indicators also fell. The Standard & Poor’s 500 index fell 9.41, or 1.22 percent, to 763.73, and the Nasdaq composite index fell 15.90, or 1.10 percent, to 1,425.93.

Investors showed little reaction to President Barack Obama’s speech Tuesday evening that touched on the need to create jobs and stabilize the credit system. He told a joint session of Congress that specifics on these and other goals would follow but that billions more may be needed to stabilize the banking system. 

Stocks rebounded Tuesday from Monday’s sell-off as Bernanke told Congress the recession might end this year, and that regulators aren’t planning to nationalize banks. The Dow posted a 236-point rally on Tuesday and a 251-point slide on Monday. Tuesday’s move lifted the Dow and the S&P 500 index off their lowest levels since 1997. 

Wall Street must now determine whether the more upbeat tone from Washington will help translate to improved consumer confidence, which tumbled to a record low this month. Consumers are key to a recovery because their spending accounts for more than two-thirds of US economic activity. 

 

Source: The Associated Press