Markets Close on Sour Note After Bernanke Issues Dire Warning

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Markets closed down on Wall Street today: Dow -0.41%, S&P -0.47%, Nasdaq -0.67%, Oil +0.33%, Gold -5.25%.

On the commodities front, Oil (NYSE:USO) rose to $106.90 a barrel. Precious metals were down, with Gold (NYSE:GLD) falling to $1,694.50 an ounce while Silver (NYSE:SLV) declined 7.10% to settle at $34.57.

Hot Feature: Why Are Oil Prices Falling?

Today’s markets were down because:

1) Treasuries. Shortly after Federal Reserve Chairman Ben Bernanke began testifying before Congress this morning, yields on 10-year Treasuries rose above 2 percent from 1.94 percent within minutes. Moments later, gold prices dropped more than 4 percent, and the euro suddenly fell from $1.3460 to $1.3400. But it would be unfair to blame it all on Bernanke — traders speculate that it may have been the result of a large Treasury trade gone awry, which could have caused computer trading models to then make large interrelated trades in currencies and commodities. Chance incident or not, gold and silver futures remain down hours after the conclusion of Bernanke’s testimony, and the euro continues to fall.

2) Bernanke. While the Fed chairman might not be responsible for the drop in commodity prices, he didn’t help matters with his gloomy outlook. Bernanke warned Congress today that unless growth accelerated, the unemployment rate would not keep dropping in the months ahead. And yet he didn’t offer the slightest bit of hope the central bank might undergo a third round of quantitative easing, a controversial albeit seemingly effective measure that in the past has helped stimulate growth.

3) Apple. The Nasdaq crossed the 3,000 mark this morning for the first time since December 2000, thanks in large part to Apple (NASDAQ:AAPL), which jumped to nearly $547 a share in the first few minutes of trading after closing around $535 a share on Tuesday. Apple recently overtook ExxonMobil (NYSE:XOM) to become the largest publicly traded company in the world by market capitalization, and has seen its share price grow roughly 70 percent since founder and former CEO Steve Jobs died on October 5. However, despite Apple’s help, the Nasdaq quickly turned south to finish the day in the red.

BONUS: What the Beige Book Says About the Economy

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