Market Wrap-Up

Stocks and most exchange-traded funds dipped ahead of the close Wednesday after much awaited speeches by Federal Reserve Chairman Ben Bernanke and Kansas City Fed President Thomas Hoenig addressed concerns about the economy.

The Dow Jones Industrial Average closed off its session low, but still dropped 72 points to 10898. The S&P 500 declined 7 points to 1182 and the Nasdaq ebbed 6 to 2431.

Investors looking for some clues about the emerging economic recovery got some reassurance from the Fed chairman Wednesday, after Tuesday’s release of the Federal Reserve’s Open Market Committee minutes shed little light.

“If economic conditions improve, as I expect, we should see increased optimism among consumers and greater willingness on the part of banks to lend, which in turn should aid the recovery,” Bernanke said in a speech in Dallas. However, Bernanke also said the United States needed to address its huge public debt.

Hoenig’s comments, made during a luncheon address in Santa Fe, N.M., got a market reaction. He said 1% rates, which the Fed could move toward “sometime soon,” would still represent “highly accommodative” monetary policy.

Bernanke’s predecessor, Alan Greenspan, appeared before the Financial Crisis Commission on Capitol Hill, telling a Congressional committee that regulators always miss crises.

“What regulators can do is pass rules that are preventative, establish greater capital requirements and enforce those rules,” he said. “That is the best we can do.”

Fears of tighter Chinese policy dragged the Shanghai Composite down 0.3%, but most other Asian stock markets rose Wednesday, with the Hang Seng up 1.8% in a catch-up rally. European stocks meanwhile sported modest losses in late morning trade.

Crude oil futures were down $1.19 at $85.65 a barrel. Gold futures rose.

Treasury Secretary Timothy Geithner headed to Beijing to possibly address one of the challenges facing the economy: the weak Chinese yuan. Geithner over the weekend delayed a report on whether China is a currency manipulator. There is speculation that China may extend the band in which the yuan can move against the dollar from plus or minus 0.3% a day to plus or minus 0.5%.

Mortgage applications dropped by 11% as the government concluded its purchases of mortgage-backed securities, according to the Mortgage Bankers Association. The average contract interest rate for 30-year fixed-rate mortgages increased to 5.31% from 5.04% the week before.

For a detailed rundown on Wednesday’s trading session see our market story. 

Winners

Shares of the Market Vectors Gold Miners fund (GDX) rose 2.9% as gold prices accelerated. The erratic pace of Wednesday’s market swings took shares of the S&P 500 VIX Short-Term Futures Index fund (VXX) down 2.2%.

Losers

Echoing moves on the spot market, the United States Natural Gas fund (UNG) shed 2.6%. The iShares Dow Jones US Real Estate Index fund (IYR) dropped 2.2% after the sharp decline in mortgage applications was announced.

Wednesday’s Industry Headlines

Launching Pad

Fund provider Javelin on Thursday plans to start trading the JETS Contrarian Opportunities Index fund, with the ticker JCO, on the New York Stock Exchange. The ETF would invest in names that have underperformed in recent years but have strong fundamentals relative to other companies in the same space. According to a filing with the Securities and Exchange Commission, the fund will employ a “passive management” – or indexing – investment approach designed to track the performance of the Dow Jones U.S. Contrarian Opportunities Index of 125 stocks. The fund may invest a portion of its assets in securities not included in its target index but which the adviser or sub-adviser believes will help the fund track its target index.

Thursday’s Notebook

Earnings and Conference Calls

International Speedway, MSCI, Penford, Peoples Educational Holdings, Pier 1 Imports, Richardson Electronics, RPM International, Zep

Economic Data

8:30 a.m. Jobless Claims
9:00 a.m. RBC CASH Index
10:30 a.m. EIA Natural Gas Report
4:30 p.m. Fed Balance Sheet
4:30 p.m. Money Supply

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