Stocks Fall Ahead of Bernanke Announcement

Stocks tumbled further than they have all month today on the eve of Ben Bernanke’s announcement on whether the Federal Reserve’s plans have changed.

The S&P 500 fell 0.78% on Thursday – matching the benchmark index’s steepest one-day decline this month. The Nasdaq Composite tumbled even further, finishing roughly 1% below where it started the day. The Dow Jones Industrial Average was on par with the S&P, dipping about 0.8%.

The declines were nothing new for the Thursday before Labor Day, however.

According to the Stock Trader’s Almanac, the S&P 500 has gained only twice in the last 16 years on the next-to-last trading session before Labor Day. So today’s losses were no shocker.

What will be interesting is what the markets do from here.

Ben Bernanke is set to announce the Federal Reserve’s intentions tomorrow. If there is further indication that a third round quantitative easing is imminent – something the central bank has hinted at recently in the face of a sluggish economy – then today’s drop may be a momentary blip in an otherwise bullish summer.

However, if the Fed stands pat again – as it essentially has for months aside from its extension of Operation Twist – then today’s losses may just be the beginning of a long market correction that brings stocks way down from their four-year highs.

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