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Fed's Beige Book Says U.S. Economic Recovery Slowed in Some Sectors

Date: 7/28/2010


A drop in durable goods orders and a gloomy reading from the Federal Reserve added more new notes of pessimism to the fragile economic recovery, pushing U.S. stocks into the red Wednesday.The Fed's latest beige book report of economic conditions showed improvement in most of its 12 regional districts, but with only modest advances in retail sales and weak numbers in housing and construction.

Bank lending, meanwhile, was still tight. The report gives a hint of what to expect at the central bank's next policy-setting meeting on Aug. 10.The weak economic assessment adds to a second consecutive monthly drop in demand for manufactured goods that was reported earlier in the day, casting more doubt on an economy that Fed chairman Ben Bernanke last week called "unusually uncertain.

"The Dow Jones Industrial Average remained slightly in the red after the Fed's beige book release, off 29 points, or 0.3%, at 10508 recently. The Standard & Poor's 500-stock index declined 0.5% to 1108, while the Nasdaq Composite lost 0.9% at 2268.

The markets have spent most of the day in a narrow trading range, with the Dow moving within a band of just 51.6 points."It's still pretty tough out there," said Mikel Keifer, investment strategist at Jurika, Mills & Keifer, adding that markets had responded to the relatively soft economic numbers by battling to a "stalemate.

"We're in this sort of range in the market and I think we're back near the top of it," Mr. Keifer said. "Unless you see something that really shifts us back on a more positive tone, I think we're just going to continue to get mixed data."Boeing was the biggest drag on the Dow, shedding 1.6% after the aerospace giant saw its second-quarter profit fall 21% amid weaker revenue in both its aviation and defense businesses.

The results beat profit expectations but missed on revenue.Telecommunications companies were the best-performing shares among S&P sectors, helped in part by strong earnings from Sprint Nextel, which rose 0.4% after reporting a smaller-than-expected loss.

Verizon Communications shares, meanwhile, rose 1.5%.Aetna fell 2.2% after the health-care giant said revenue and employer-based membership declined, though profits rose 42%.

Aetna also said it awarded a 12-year contract to CVS Caremark to handle pharmacy-benefit-management services for some 9.7 million Aetna members, which helped CVS gain 4.2%.General Dynamics gained 0.8% after the defense contractor and maker of Gulfstream business jets saw its second-quarter profit climb by a higher-than-expected 4.9% amid flat revenue.

Comcast rose 1.6% after reporting an 8.6% drop in income, though revenues rose.International Paper sank 6.5% after it reported a 32% drop in earnings, adding that it expects U.S. economic growth to slow later this year.

Newmont Mining slipped 0.5% after second-quarter net income rose to $382 million, beating expectations.Oil major ConocoPhillips edged up 0.2% after reporting better-than-expected earnings of $1.67 per share.

The oil company also said it would sell 40% of its Lukoil stake back to Lukoil.The euro struggled to hold onto the $1.30 level, trading recently at $1.2982, down from $1.3003 late Tuesday in New York. The U.S. Dollar Index, which tracks the U.S. currency against six others, was off 0.1%. Oil futures fell just below $77 a barrel.