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Tuesday, December 7, 2010

WALL STREET >>> Stocks In Holding Pattern; Dow Dip 19.90 (-0.17%)

Stocks Lifeless After Lacker Contradicts Bernanke's Dovish Comments
After bouncing between minor gains and losses throughout the day, Wall Street landed on the fence on Monday, preserving virtually all of last week’s big gains as investors considered some contradictory comments from central bankers.

On 60 Minutes last night, Federal Reserve Chairman Ben Bernanke said it was "possible" that the central bank could extend its stimulus efforts, if regulators decide that such a move is warranted by economic conditions. "Fear of inflation, I think, is way overstated," said Bernanke, who went on to note, "We're getting awfully close to the range where prices would actually start falling."

However, Richmond Fed President Jeffrey Lacker was on hand to play devil's advocate. Speaking in Charlotte today, Lacker asserted that the risk of deflation has actually lessened in recent months. "At some point we will need to respond by reducing the provision of liquidity to the banking system to prevent inflation from accelerating, as it often can when a recovery picks up steam," explained Lacker. As traders puzzled over these opposing viewpoints, stocks wrapped up a relatively quiet today on either side of the breakeven line.
Wall Street had a muted reaction to the "60 Minutes" interview of Federal Reserve Chairman Ben Bernanke, who said the central bank is open to more stimulus measures if inflation remains tame and the economy needs it.

The Dow Jones Industrial Average (DJIA – 11,362.19) settled for a slide of 19.9 points, or 0.2%, as 20 of its 30 components closed lower. Bank of America (BAC) paced the declining blue chips, while Cisco Systems (CSCO) set the tone for the 10 gainers, thanks to an analyst upgrade. Despite today's dip, the Dow remains perched well above its 10-day moving average, which is docked near 11,200.
The S&P 500 Index (SPX – 1,223.12) followed suit by shedding 1.6 points, or 0.1%, although the index maintained its newfound foothold above the 1,220 region.
Finally, the Nasdaq Composite (COMP – 2,594.92) one-upped its peers by finishing in the black. The COMP added 3.5 points, or 0.1%, after earlier rising to a new annual high of 2,599.19 -- its best price since January 2008.

By closing mostly unchanged, Wall Street managed to shrug off early concerns about Europe's sovereign debt crisis that were sparked by weakness in the euro. Those worries faded a bit as the euro erased about half of its losses.

Underscoring how directionless U.S. markets were on Monday, the Dow moved in a very tight range of just 41 points and on very thin volume. Last week the benchmark index surged nearly 300 points and ended at three-week highs amid mostly stronger-than-expected economic headlines and calmer European markets.

"It was like watching paint dry"

Cold winter weather stoked gains in crude oil today, even as the U.S. dollar advanced against a few key foreign rivals. A blanket of snowy, chilly weather settled over much of the nation this past weekend, inspiring traders to price in their expectations for a blustery season of robust oil demand. Crude for January delivery settled on a slim gain of 19 cents, or 0.2%, at $89.38 per barrel -- the contract's highest close since Oct. 7, 2008.


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