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Wall St slips after Fed

Aug 02 2012 08:28 Reuters

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New York - US stocks slipped on Wednesday on disappointment that the Federal Reserve offered no new measures to stimulate the economy and after a computer glitch at a brokerage triggered a spike in volatility shortly after the open.

The market will now turn its focus to the highly anticipated European Central Bank meeting on Thursday amid expectations that the ECB could detail action to bring down rising borrowing costs in Italy and Spain in defense of the euro.

"The big fireworks are tomorrow, with the statement from the European Central Bank," said Jim Russell, chief equity strategist at US Bank Wealth Management in Cincinnati.

He said the market is expecting swift, powerful action from the ECB. "Anything short of that will represent a disappointment to the capital markets."

Fed officials described the US economy as having "decelerated somewhat," a change of tone from its June statement that it was "expanding moderately." But the US central bank stopped short of offering new monetary stimulus.

Markets rallied late last week in part on hopes for action from the Fed but mostly as expectations grew the ECB would take action to protect the euro at its Thursday meeting.

The Dow Jones industrial average fell 32.55 points, or 0.25 percent, at 12,976.13. The S&P 500 Index slipped 4.00 points, at 1,375.32. The Nasdaq Composite lost 19.31 points, at 2,920.21.

The run-up to the Fed statement was overshadowed by a spike in volume and volatility in some 140 New York Stock Exchange stocks shortly after the market opened due to a "technology issue" at market maker Knight Capital.

Knight said in a statement it was advising traders to execute their trades elsewhere and its shares tumbled 32.8% to $6.94, a nine-year closing low.

"All the brokers were on it within seconds, recognizing this was not normal behavior in most of these stocks," said Doreen Mogavero, chief executive at Mogavero, Lee & Co, who trades on the floor of the NYSE.

It was the latest in a series of high-profile mishaps that have damaged investor confidence in stock markets.

Wall Street opened higher after data showed US companies hired more workers than expected in July, but continued weakness in the manufacturing sector pointed to sluggish economic growth.

Volume was above average with 7.26 billion shares changing hands on the NYSE, NYSE Mkt and Nasdaq, above the year-to-date daily average of 6.74 billion.

About eight issues fell for every five that rose on the NYSE while on the Nasdaq 14 fell for every five advancing issues.

us federal reserve  |  wall street  |  markets
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