US STOCKS-Wall St closes lower on Fed disappointment

NEW YORK (Dec 13): U.S. stocks fell for a second straight day on
Tuesday after the Federal Reserve gave no hints of new stimulus measures
to offset the effects of the worsening European debt crisis.

Though the Fed did leave the door open to further easing next year,
as it has done after recent meetings, it gave no indication it was any
more inclined to provide new economic stimulus.

The Fed left monetary policy on hold and said financial market
turbulence posed threats to economic growth. It also characterized the
U.S. economy as expanding moderately despite an apparent slowing in
global growth, though it added that unemployment remains elevated and
housing activity depressed.

The Fed "gave the economy a very slight upgrade, but it sort of took
the wind out of domestic equities, probably because some were hoping
that they would hint at another [quantitative easing]-like program,"
said Robert Phipps, a director at Per Stirling Capital Management in
Austin, Texas.

Wall Street traded higher for much of the volatile session, but
turned negative after the Fed's announcement. The losses accelerated
going into the close and the S&P 500 briefly fell below its 50-day
moving average. A close under that key level could signal more losses to
come.

The Dow Jones industrial average slid 66.45 points, or 0.55 percent,
to end at 11,954.94. The Standard & Poor's 500 Index dropped 10.74
points, or 0.87 percent, to 1,225.73. The Nasdaq Composite Index lost
32.99 points, or 1.26 percent, to close at 2,579.27.

The disappointment with the Fed came at the tail-end of a trading
session that was largely focused on Europe, especially after German
Chancellor Angela Merkel rejected any suggestion of raising the limit on
Europe's bailout fund.

Investors had been closely eyeing developments concerning the fund,
the European Stability Mechanism (ESM), which will go into effect from
the middle of next year and replace the current European Financial
Stability Fund. The ESM will have an effective lending capacity of 500
billion euros.

"The developments in Europe don't address the region's short-term
liquidity issues, so the next step is trying to figure that out," said
Randy Frederick, director of trading and derivatives for Charles Schwab
in Austin, Texas.

"That uncertainty is why our markets have been pressured lately. We're still all about Europe here."

Consumer-related stocks were the worst performers. Shares of Best Buy
tumbled 15.5 percent to $23.73 after the electronics retailer reported a
quarterly profit below expectations as bigger discounts squeezed
margins. The S&P consumer discretionary sector fell 2 percent .

U.S. government data showed U.S. retail sales rose less than expected
in November as a drop in receipts for food and beverages weighed
against stronger sales of motor vehicles, tempering expectations of a
strong holiday shopping season.

U.S. crude oil futures prices rose more than 2 percent, advancing
above $100 a barrel at the session high, with traders citing tension
between the West and Iran as a possible trigger. The S&P energy
index had been up more than 2 percent at its session high, but was
unable to maintain its gains and closed down 0.5 percent.

The only sector to close higher was utilities, considered a defensive play.

Volume was light, with about 7.28 billion shares traded on the New
York Stock Exchange, the American Stock Exchange and Nasdaq, below last
year's daily average of 8.47 billion.

More than two stocks fell for every one that rose on the New York
Stock Exchange, while on the Nasdaq, about 74 percent of issues closed
lower. – Reuters