US Stocks Fall As Bernanke Disappoints

NEW YORK (Dow Jones)--U.S. stocks tumbled Wednesday despite strong earnings reports from Morgan Stanley, Wells Fargo and Apple, as investors were disappointed with Federal Reserve Chairman Ben Bernanke's signal that the central bank is not planning further stimulus in the near term.

The Dow Jones Industrial Average declined 109.43 points, or 1.07%, to 10120.53, its first drop in three sessions. While the drop was broad, the Dow's financial components got hit the hardest. J.P. Morgan Chase fell 1.21, or 3.1%, to 38.42 and Bank of America declined 41 cents, or 3%, to 13.36.

Among the Dow's other decliners, Johnson & Johnson fell 1.46, or 2.5%, to 57.12, Hewlett-Packard declined 1.13, or 2.4%, to 45.48, and Alcoa dropped 26 cents, or 2.4%, to 10.59.

The declines followed testimony from Bernanke calling the economic outlook "unusually uncertain" but indicating that no moves were imminent to bolster the recovery. In addition, Bernanke's comments remained focused on how the central bank will need to tighten conditions to prevent inflation "at some point."

Investors said it seemed too early to be discussing an exit plan, and pointed to the "unusually uncertain phrase" as an area of particular concern.

"It's different, new language," said Maury Fertig, chief investment officer at Relative Value Partners. "This is saying they're clearly not as confident in their forecast."

Fertig added, "The fear of a double dip is so great that anything that smells of that at all has got investors completely running for the hills."

Still, Coca-Cola managed to climb 84 cents, or 1.6%, to 54.08, leading the Dow's few gainers. Aggressive marketing around the soccer World Cup gave the company's namesake soda a boost in the second quarter, driving sales in markets from the U.S. to Brazil and pushing profit up 16%.

Caterpillar and 3M also eked out gains ahead of their second-quarter reports due Thursday morning. Caterpillar rose 44 cents, or 0.7%, to 66.87, while 3M added 11 cents, or 0.1%, to 82.30.

The Standard & Poor's 500 index declined 13.89, or 1.28%, to 1069.59, with all of its sectors closing in the red, led by financials.

However, Morgan Stanley jumped 1.58, or 6.3%, to 26.80 after its quarterly results showed resurgent sales and trading operations boosted the investment bank's second-quarter profit.

Wells Fargo was another bright spot. The bank's profit jumped 20% from the prior quarter, as once-raging loans losses tapered sharply and hedging gains from mortgage-servicing rights boosted the firm's bottom line. Its shares edged up 15 cents, or 0.6%, to 26.06.

The Nasdaq Composite dropped 35.16, or 1.58%, to 2187.33. Weighing on the measure, Yahoo (Nasdaq) tumbled 1.29, or 8.5%, to 13.91 after the Internet giant's second-quarter revenue came in below analysts' expectations.

Still, Apple (Nasdaq) climbed 2.35, or 0.9%, to 254.24. The consumer-electronics giant posted a 78% jump in fiscal third-quarter profit on stout initial sales of its multimedia iPad device and the latest version of its popular smartphone, the iPhone 4, while Macintosh computer sales also hit a record.

Textron leapt 1.57, or 8.7%, to 19.65. The maker of Cessna planes and Bell helicopters swung to a sharply higher second-quarter profit than analysts expected and boosted its 2010 profit target.

Boston Scientific dropped 30 cents, or 4.8%, to 5.97. The medical-device maker's second-quarter profit slid 38% on double-digit sales declines for defibrillators and stents, as well as lower margins.

BlackRock slipped 6.03, or 4%, to 143.33. The investment-management firm's second-quarter profit doubled on the impact from December's $13.5 billion acquisition of indexing giant Barclays Global Investors, topping analysts' expectations. However, the firm continued to experience some deal-related business outflows in the second quarter, which disappointed the market.

EMC Corp. fell 76 cents, or 3.8%, to 19.48. The data-storage company's second-quarter earnings more than doubled and the company said it expects to exceed previous forecasts for full-year profit and revenue. But shares fell as the company didn't quantify by how much it expects to top its current forecast for the year, and investors were hoping for more clarity.

Freeport-McMoRan Copper & Gold edged up 1.74, or 2.7%, to 66.06. The mining company's second-quarter profit rose 2.5% on lower taxes and higher revenue as prices continue to rise.

Eaton climbed 4.08, or 5.9%, to 73.14. The diversified manufacturer's second-quarter earnings soared as the company continued to recover from last year's slumping demand, especially in its automotive segments.

Quest Diagnostics declined 3.25, or 6.5%, to 46.70. The operator of clinical laboratories that perform medical tests posted second-quarter earnings above analysts' estimates, but the company lowered its 2010 earnings projection, citing "a further slowdown in physician-office visits."

Cytec Industries surged 7.07, or 17%, to 49.86. The specialty chemicals and materials company swung to a second-quarter profit, handily topping Wall Street expectations as sales and volume climbed.