Stocks slip as investors await the Fed

By NBC News wire services

Stocks closed lower on Tuesday as investors awaited the outcome of the Federal Reserve Board's two-day meeting when it is widely expected to unveil new stimulus to help revive the faltering economic recovery.

The Dow Jones industrial average closed the day down 64 points.

The stock market cooled off on Monday and the chill carried over into Tuesday's session, following the best two-day run this year.

The recent rally was fueled by increased expectations that the Fed and the European Central Bank will take action to stimulate their respective economies at meetings this week.

Last week, ECB President Mario Draghi said the ECB was ready to do whatever it takes to preserve the euro, igniting hopes that the bank could revive its bond-purchase program to help cut the borrowing costs of debt-stricken Spain and Italy. But the German Bundesbank promptly pushed back on that idea, leaving investors watching and waiting.

"Why would Germany agree now? They'll wait until the last minute," said Jeff Meyerson, head of trading for Sunrise Securities in New York. "I think it's inevitable that the ECB is going to have to expand the euro base substantially, but if they bail out Spain, is there enough left to fix Italy? There are certainly a lot more questions than answers."

The Fed will wrap up its two-day meeting on Wednesday, while the ECB is set to meet on Thursday.

Government data showed consumer spending fell in June for the first time in nearly a year when accounting for inflation, while household income rose 0.5 percent.

The S&P/Case-Shiller composite index of 20 metropolitan areas gained 0.9 percent in May on a seasonally adjusted basis, topping economists' expectations for a 0.5 percent increase and suggesting the housing market's recovery continues to gain its footing.

The Conference Board, an industry group, said its index of consumer attitudes rose to 65.9 in July from an upwardly revised 62.7 in June, topping economists' expectations for a decline to 61.5.

Earnings season kept rolling along, with quarterly results scheduled from companies including Electronic Arts and FMC Corp.

Disappointing results from large companies such as handbag maker Coach put investors on edge, said Andrew Frankel, co-president of Stuart Frankel & Co in New York.

"It creates a sense of fear in managers' heads. This, coupled with headlines from Europe that won't go away and fears that China's slowing down means you have managers who would like to watch the action versus participate in the action."

Coach Inc slumped after the upscale leather goods maker reported lower-than-expected fourth-quarter sales.

Anheuser-Busch InBev , the world's largest brewer, fell short of second-quarter earnings expectations, selling less beer and spending more on distribution and marketing new U.S. brands.

Pfizer Inc shares jumped after the largest U.S. drugmaker reported higher-than-expected quarterly earnings and affirmed its 2012 profit forecast.

Aetna Inc posted weaker quarterly earnings as expenses rose, but the results were still higher than analysts had expected.

According to Thomson Reuters data through Monday morning, of the 321 companies in the S&P 500 that have reported second-quarter earnings to date, 67 percent have reported earnings above analysts' expectations. Over the past four quarters, the average is 68 percent.

Reuters contributed to this report.

Source: http://marketday.nbcnews.com/_news/2012/07/31/13054642-stocks-slip-as-investors-await-the-fed?lite

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