- The Washington Times - Thursday, June 18, 2009

ASSOCIATED PRESS

A cautious forecast from FedEx Corp. and a ratings downgrade of 18 banks gave investors new reasons to worry about the economy Wednesday.

Stocks mostly fell, though health shares gained as the Senate made tentative steps on a health care overhaul plan. Overall, the market was held back by FedEx’s weak profit forecast and downbeat comments about the economy.

The Dow Jones industrial average fell 7.49 points, or 0.1 percent, to close at 8,497.18 after moving in and out of positive territory during the day. The broader S&P; 500 Index fell 1.26, or 0.1 percent, to 910.71, and the Nasdaq Composite Index rose 11.88, or 0.7 percent, to 1,808.06.

Financial stocks saw some of the biggest losses after Standard & Poor’s cut its ratings and revised outlooks on big banks. S&P; cited concerns that the financial industry will remain volatile and that banks are expected to face tighter regulatory oversight.

BB&T; Corp. and Wells Fargo & Co. were among the biggest banks hit with lower ratings. BB&T; fell 65 cents, or 2.9 percent, to $21.58, while Wells Fargo slid $1.31, or 5.4 percent, to $23.09.

On a bright note, consumer prices rose less than expected in May and posted the steepest annual drop in 59 years, according to government data released Wednesday, fresh evidence that the recession is keeping inflation in check.

The Labor Department said the consumer price index rose a seasonally adjusted 0.1 percent last month, less than a 0.3 percent rise that had been forecast. Excluding volatile food and energy costs, core prices rose 0.1 percent, as expected.

Consumer prices fell 1.3 percent in the 12 months ending in May, the steepest drop since 1950. The core CPI has increased 1.8 percent since last year.

“Inflation may be coming, but it’s not here yet and likely won’t be for some time,” Richard Moody, chief economist at Forward Capital, wrote in a note to clients.

Separately, the Commerce Department said Wednesday the current account trade deficit dropped to $101.5 billion in the first quarter, down 34.5 percent from the fourth quarter. It was the lowest current account deficit since the final quarter of 2001 when the country was mired in its last recession.

The market’s zigzags came as investors looked at the White House’s plan for remaking the rules that govern Wall Street. The changes would award new powers to the Federal Reserve to supervise large financial institutions considered too big to fail. It also would establish a consumer protection agency to govern lending and credit as well as rules that would reach into unregulated regions of the financial markets.

Bond prices mostly rose, pushing yields lower. The yield on the benchmark 10-year Treasury note rose to 3.69 percent from 3.65 percent late Tuesday.

Oil rose 56 cents to settle at $71.03 a barrel after a government report said crude held in storage fell for a third straight week.

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