Wall Street slips after Fed, trading glitch

NEW YORK Wed Aug 1, 2012 4:35pm EDT

Traders work on the floor of the New York Stock Exchange, July 27, 2012. REUTERS/Brendan McDermid

Traders work on the floor of the New York Stock Exchange, July 27, 2012.

Credit: Reuters/Brendan McDermid

NEW YORK (Reuters) - Stocks slipped on Wednesday on disappointment that the Federal Reserve offered no new measures to stimulate the economy and after a computer glitch at a brokerage triggered a spike in volatility shortly after the open.

The market will now turn its focus to the highly anticipated European Central Bank meeting on Thursday amid expectations that the ECB could detail action to bring down rising borrowing costs in Italy and Spain in defense of the euro.

"The big fireworks are tomorrow, with the statement from the European Central Bank," said Jim Russell, chief equity strategist at U.S. Bank Wealth Management in Cincinnati.

He said the market is expecting swift, powerful action from the ECB. "Anything short of that will represent a disappointment to the capital markets."

Fed officials described the U.S. economy as having "decelerated somewhat," a change of tone from its June statement that it was "expanding moderately." But the U.S. central bank stopped short of offering new monetary stimulus.

Markets rallied late last week in part on hopes for action from the Fed but mostly as expectations grew the ECB would take action to protect the euro at its Thursday meeting.

The Dow Jones industrial average .DJI fell 32.55 points, or 0.25 percent, at 12,976.13. The S&P 500 Index .SPX slipped 4.00 points, or 0.29 percent, at 1,375.32. The Nasdaq Composite .IXIC lost 19.31 points, or 0.66 percent, at 2,920.21.

The run-up to the Fed statement was overshadowed by a spike in volume and volatility in some 140 New York Stock Exchange stocks shortly after the market opened due to a "technology issue" at market maker Knight Capital.

Knight (KCG.N) said in a statement it was advising traders to execute their trades elsewhere and its shares tumbled 32.8 percent to $6.94, a nine-year closing low.

"All the brokers were on it within seconds, recognizing this was not normal behavior in most of these stocks," said Doreen Mogavero, chief executive at Mogavero, Lee & Co, who trades on the floor of the NYSE.

It was the latest in a series of high-profile mishaps that have damaged investor confidence in stock markets.

Wall Street opened higher after data showed U.S. companies hired more workers than expected in July, but continued weakness in the manufacturing sector pointed to sluggish economic growth.

Volume was above average with 7.26 billion shares changing hands on the NYSE, NYSE Mkt and Nasdaq, above the year-to-date daily average of 6.74 billion.

About eight issues fell for every five that rose on the NYSE while on the Nasdaq 14 fell for every five advancing issues.

(Reporting by Rodrigo Campos; Editing by Kenneth Barry)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (7)
breezinthru wrote:
To QE or not to QE? That is the question.

What the Fed’s decision comes down to is whether or not the Fed believes that QE can impact the world economy strongly enough to preclude the collapse of the Eurozone.

Of course, QE cannot accomplish that. The Eurozone situation contains far too many critical variables and decision points that the American Fed cannot influence.

If the Fed chooses a perfectly sized QE now and the Eurozone stumbles anyway, a terrified economic world would look to America to do something big… and the Fed could only shrug and say something like, “there are a few little things we could try, but we’ve already taken our best shot at this.”

In the aftermath of a Eurozone disaster, it doesn’t matter whether or not QE can actually pull the world’s economies back to health. What would matter in that desperate moment is whether America offers hope… or an apologetic shrug.

Since it would be foolish to sprinkle the remainder of America’s QE fairy dust right now, Bernanke should seize this poignant moment to point out (once again) that America should be looking to Congress to formulate a solution to America’s economic problems, not to the Fed.

Aug 01, 2012 1:15am EDT  --  Report as abuse
Excellent Review

Aug 01, 2012 7:36am EDT  --  Report as abuse
scythe wrote:
(quote) “We are going to need a monetary booster shot both from Europe and the U.S. to keep this party going.”

sad fella

equity markets should not rely on monetary welfare to function

the party is over

Aug 01, 2012 12:23pm EDT  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.