NEW YORK (AP) — The stock market keeps getting tossed around by the Fed.
Stocks
opened lower Friday but reversed course after a letter surfaced from
Federal Reserve Chairman Ben Bernanke, suggesting there was room for the
central bank to do more to help the economy.
"There is scope for
further action by the Federal Reserve to ease financial conditions and
strengthen the recovery," Bernanke wrote to California Rep. Darrell
Issa, a Republican, in a letter obtained by The Wall Street Journal.
The
Dow Jones industrial average was down 30 points at its low but was up
87 at 13,144 at mid-afternoon. The Standard & Poor’s 500 index was
up eight to 1,411. The Nasdaq composite index rose 17 to 3,071.
In
a typically slow August week, without much else to influence trading,
investors have grasped for hints about what the Fed might do.
On
Wednesday afternoon, investors pushed stocks higher after the Fed
released meeting minutes that appeared to signal it was ready to take
more action to prop up the economy.
On Thursday, stocks declined
when a Fed regional bank president cast doubt on the idea, saying in an
interview with CNBC that the economic recovery appeared to be gaining
strength.
Then on Friday, Bernanke shook up the market again. His
letter was in response to questions from Issa, the head of the House
oversight committee, who had asked whether it was premature to consider
additional steps.
The Fed has several options, including buying
bonds, as it has done twice since the 2008 financial crisis, to try to
lower interest rates and drive investors into the stock market.
Still,
it’s debatable how much future Fed action would help the market or the
economy. On Friday, some analysts thought it strange that the market
moved so decisively on just an inkling about what the Fed chairman might
be thinking.
"What’s new about what came out?" said Ann Miletti,
senior portfolio manager at Wells Fargo Advantage Funds in Milwaukee. "I
guess the markets are dependent on having some commentary about the
macro economy every single day."
For the most part, the market has
been hard to read this month. Without much news, trading volume has
been low, and investors haven’t had much conviction either way about the
economy.
Of 17 trading days in August, only once has the Dow
moved more than 1 percent. On five days, it has been virtually flat,
moving less than one-tenth of a percentage point.
The turbulence
likely lies ahead. The Fed’s annual meeting in Jackson Hole, Wyo., is at
the end of the month. German courts are set to decide next month
whether the country can keep participating in bailouts for weaker
European countries.
And the presidential election in November,
which will help determine whether taxes go up and government spending is
cut next year, could throw the markets into turmoil for weeks
beforehand.
"People look forward to a lot of questions being
answered in the months ahead," said Tony Fratto, a former aide to
President George W. Bush and managing partner at Hamilton Place
Strategies in Washington. "But they don’t have answers today."
This
is still likely to be the first down week for the Dow and the S&P
500 after six weeks of gains. The economic reports that have trickled
out this week have been mixed at best.
Europe, though quiet, still
showed signs of tension Friday. Britain reported that its economy
shrank in the second quarter, the latest confirmation that the country
is still in recession.
The Greek prime minister met with his
German and French counterparts to discuss Greece’s bailout. Greek Prime
Minister Antonis Samaras said Greece needs "time to breathe" while it
implements spending cuts that Germany is demanding. German Chancellor
Angela Merkel replied that Germany expects Greece to follow through with
its commitments, "that deeds follow words."
Durable goods orders,
reported by the Commerce Department, rose in July but fell after
excluding gains from the volatile transportation category. Durable goods
are an important measure of economic health because those orders show
whether businesses are willing to spend to expand or improve.
Software
maker Autodesk skidded more than 15 percent, falling $5.58 to $30.13,
after weaker-than-expected second-quarter results. The company is
restructuring to shift to cloud and mobile computing, but it also blamed
an "uneven" global economy.
Drugmaker Eli Lilly jumped more than 3
percent, rising $1.33 to $43.73, after reporting promising signs about a
possible treatment for Alzheimer’s disease.
The Madison Square
Garden Co., which hosts shows and games at Madison Square Garden, Radio
City Musical Hall and other venues, jumped more than 5 percent, rising
$2.16 to $42.41, after reporting that profits more than tripled in the
fiscal fourth quarter. It was helped partly by more home playoff games
over the quarter for the New York Rangers and the New York Knicks.
Copyright 2012 The Associated Press.