US STOCKS-Tense market falls ahead of Bernanke speech

Thu Aug 25, 2011 4:39pm EDT



 * Bank of America jumps after Buffett investment
 * Apple losses modest after Steve Jobs resigns
 * German DAX slumps, triggers U.S. stocks' slide
 * Dow down 1.5 pct, S&P off 1.6 pct, Nasdaq off 1.95 pct
 * For up-to-the-minute market news see [STXNEWS/US]
 (Updates to close, changes comment, byline)
 By Rodrigo Campos
 NEW YORK, Aug 25 (Reuters) - U.S. stocks fell on Thursday
as investors raised cash ahead of a critical speech from Fed
Chairman Ben Bernanke, hoping he will give them a clearer
picture of the Fed's plans for the struggling economy.
 Several negatives contributed to the market's weakness
after three days of gains. Jitters over a sharp drop in German
stocks and a report showing continued U.S. job market weakness
helped fuel the selling.
 Stocks rose earlier this week, partly on expectation the
soft U.S. economy could trigger another round of monetary
stimulus from the Federal Reserve, much like the one suggested
by Bernanke at the same conference in Jackson Hole, Wyoming, a
year ago.
 "There is an assumption there is not going to be an
announcement on monetary policy, but the market set up this
week like that was the case," said Art Hogan, managing director
of Lazard Capital Markets in New York.
 "There seems to be a bit of a dichotomy from what people
are saying to what they are doing."
 Bernanke, who is scheduled to speak on Friday at 10 a.m.
New York time (1400 GMT), is most likely to outline gradualist
measures, which would disappoint those looking for dramatic
action, such as a fresh round of asset purchases.
 Stocks opened higher after Bank of America (BAC.N) said
Warren Buffett's Berkshire Hathaway (BRKa.N)(BRKb.N) would be
taking a $5 billion stake in the bank, whose shares had fallen
to two-year lows earlier this week.
 "We had some upbeat emotion at the open with Warren
Buffett's investment in Bank of America but that fizzled very
quickly when we looked across the pond and saw what was going
on with German markets," said Hogan.
 The S&P 500 is still up 3.2 percent so far this week, which
could be the first positive one for the benchmark index in the
past five.
 The Dow Jones industrial average .DJI dropped 170.89
points, or 1.51 percent, to 11,149.82. The Standard & Poor's
500 Index .SPX fell 18.33 points, or 1.56 percent, to
1,159.27. The Nasdaq Composite Index .IXIC lost 48.06 points,
or 1.95 percent, to 2,419.63.
 Volume has decreased from the frenzied first three weeks of
August. Major averages have stabilized, with 1,120 on the S&P
500 now viewed as a key support level, but it remains to be
seen whether stocks can gather enough steam for an extended
rally.
 "I think a lot of what's been happening in the market is
positioning or repositioning for different events," said Doreen
Mogavero, CEO of Mogavero, Lee & Co in New York. "I'm not sure
how much of it is real investing."
 Bank of America gained 9.4 percent to $7.65 in trading of
more than 855 million shares, or almost 10 percent of total
composite volume on the day.
 Citigroup (C.N) gained 4.9 percent to $29.03, but Buffett's
investment did not entice buying across the banking sector, and
the KBW bank index .BKX shed 0.2 percent.
 The S&P financials index .GSPF, which had been the only
S&P sector in positive territory earlier in the session,
declined 0.46 percent. The index had earlier climbed as much as
4.7 percent.
 Apple Inc (AAPL.O) fell 0.65 percent to $373.72 on the
first trading day after news that co-founder Steve Jobs
resigned as chief executive. For more see [ID:nN1E77N227].
 About 8.9 billion shares traded on the New York Stock
Exchange, NYSE Amex and Nasdaq, above the year-to-date average
of 7.9 billion but below the 11.2 billion average so far in
August.
 Declining stocks outnumbered advancing ones on the NYSE by
a ratio of about 16 to 5, while on the Nasdaq, more than four
stocks fell for every one that rose.
 The European benchmark FTSEurofirst 300 index .FTEU3 fell
1.3 percent and Germany's DAX .GDAXI dropped as much as 5
percent before closing down 1.7 percent on talk Germany could
enact a short-selling ban following the example of other
European nations. A German government spokesman said there were
no plans for a general short-selling ban.
 (Reporting by Rodrigo Campos; Editing by Kenneth Barry)


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