US markets retreated on Tuesday’s close, as Federal Reserve Chairman Ben Bernanke said that economic prospects remained uncertain. He also said that more action would be necessary to jolt the economy out of the financial crisis. The S&P ended a few points below the 700 mark for the first time since October 1996.

The Dow Jones closed at 6,726.02, down 37.27 points or 0.6%. The S&P 500 Index closed at 696.33 to fall 4.49 points or 0.6%. The Nasdaq was the best performer of the three major indexes, shedding less than 2 points to close at 1,321.01 amid strength in tech stocks.

Eco weakness to continue

US policymakers warned of the dismal economic situation as the US Federal Reserve Chairman Ben Bernanke testified before the Senate Banking Committee while US Treasury Secretary Timothy Geithner testified before the House Panel on Budget.

“It’s clear that in order to get control over the budget situation we are going to need to look at entitlements. If we don’t get a sustainable fiscal situation and deficits continue for a long period, it will become more difficult to sell our debt and interest rates will rise and it will be counter-productive,” Bernanke said. He added that a more comprehensive approach will eventually stabilize the system.

Fed, Treasury launch TALF

The Federal Reserve and US Treasury launched the Term Asset-backed securities Loan Facility (TALF), a USD 200 billion credit infusion aimed at loosening the availability of credit for consumers and small businesses. In economic news, pending-home sales dropped 7.7% to the lowest level on record.

Commodity check

Crude prices rebounded after dropping 10% to settle over USD 41 a barrel as expectations that producer group OPEC will cut production again countered wider economic concerns.

Gold tumbled the most in seven weeks, extending the longest slump since October, as a rebound in equities eroded the investment appeal of the metal. Silver dropped to the lowest in almost a month.

source: Moneycontrol

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