Russell 2000 and Dow stumble
The Russell 2000 (NYSE: IWM) and the Dow (INDU) are below the flat line after two days of strong gains.
At 10:38 a.m. ET, the small-cap index had lost 3.69 points, or 0.45%, to 813.71. The Dow Jones Industrial Average had shed 24.80 points, or 0.18%, to 13,790.76.
Speaking to Congress this morning, U.S. Federal Reserve Chairman Ben Bernanke told lawmakers that the recent financial turbulence stems from the troubled subprime mortgage sector, “but the resulting global financial losses have far exceeded even the most pessimistic estimates of the credit losses on these loans.”
The result, Bernanke said, is that “recent developments in financial markets have increased the uncertainty surrounding the economic outlook.”
Nevertheless, he said the overall financial system remains strong.
News of those remarks cast a dark cloud over Wall Street and stocks fell out of the gate, since recovering some of their losses.
Contributing to the bearish sentiment this morning, financial services giant Bear Stearns Companies Inc. (NYSE: BSC) reported that its profit fell a whopping 61% in the third quarter due to its investment in securities backed by subprime mortgages, marking the company’s worst quarterly performance since 2006.
On the other hand, Goldman Sachs Group, Inc. (NYSE: GS) announced that its quarterly earnings soared 79%, easily outpacing Wall Street’s projections. Profit for the three months ended Aug. 31 was $2.85 billion, or $6.13 per share, while analysts had forecasted a profit of $4.35 per share. The New York-based investment bank had a net income of $1.55 billion, or $3.26 per share, a year earlier.
In economic news, the number of American workers filing for unemployment benefits fell to the lowest level in seven weeks, announced the U.S. Labor Department before the start of trading. Initial jobless claims for the week ended Sept. 15 fell 9,000 to 311,000, while economists were expecting claims to stay at their upwardly revised previous level of 320,000.
The four-week average dipped to 320,750, from 324,250.
The labor market has come in focus as fears of an economic slowdown have increased in the past few weeks, but today’s numbers show an unexpected improvement.
Overseas, Japan’s Nikkei 225 added a minuscule 0.2%, while in London the FTSE 100 let go 0.6%.
Elsewhere, a Philadelphia-area manufacturing survey will be coming out later today.
