U.S. stocks fall as Fed statement fails to bolster confidence

Aug. 1 (Bloomberg) -- U.S. stocks fell, reversing earlier gains, as the Federal Reserve’s pledge to provide additional support for the economy disappointed investors anticipating a more definitive sign of further monetary easing.

Knight Capital Corp., one of the largest market makers of U.S. stocks, plunged as much as 26 percent as it experienced technology issues with trading. MasterCard Inc., the second- biggest payments network, slid 2.3 percent as sales missed estimates. Comcast Corp., the largest U.S. cable company, and Allstate Corp., the biggest publicly traded U.S. home and auto insurer, advanced after quarterly earnings beat projections.

Five stocks fell for every three rising on U.S. exchanges at 2:57 p.m. New York time. The Standard & Poor’s 500 Index dropped 0.2 percent to 1,376.43, after advancing 0.4 percent earlier. The Dow Jones Industrial Average lost 25.36 points, or 0.2 percent, to 12,983.32. Trading in S&P 500 companies was up 18 percent from the 30-day average at this time of day.

“The Fed is in a tough place,” said David Joy, the Boston-based chief market strategist at Ameriprise Financial Inc. His firm oversees about $650 billion. He spoke in a phone interview. “The economic data is ambiguous enough to justify doing something or doing nothing. They chose to wait and see. That comes as a disappointment to some people.”

The Fed said the economy has slowed and foreshadowed new steps to boost the weakening expansion. “The committee will closely monitor incoming information on economic and financial developments and will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” the Federal Open Market Committee said today at the conclusion of a two-day meeting in Washington.

Economic Data

U.S. stocks rose earlier as data showing manufacturing weakness from China and Europe boosted speculation policy makers will act to support the economy. Manufacturing in the U.S. unexpectedly contracted for a second month in July, indicating a mainstay of the economy was struggling to improve.

Dozens of stocks swung 10 percent or more without accompanying news in the first minutes of trading, whipsawing investors. Knight Capital Group Inc. told some clients of its market-making unit that a “technical issue” was affecting its systems and advised them to route orders elsewhere.

Knight, which helps execute billions of dollars in equity transactions every day, said the issue was confined to market making and other operations were unaffected. Its stock plunged as investors speculated on its role in the incident, which spurred concern that computers had distorted trading for the second time in two weeks.

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