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Darrell Issa

Darrell Issa

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Stocks Finish Mixed as Fed Holds Steady The central bank indicated it would keep rates near zero for "an extended period".

Bond yields climbed after the announcement Story Toolspost a commente-mail this storyprint this storyorder a reprintsuggest a storydigg thissave to del.icio.usU.S.

stocks closed mixed Wednesday, with the Dow industrials lagging the broader market due to drops in Boeing (BA), United Technologies (UTX), and certain other blue chips.

Most stocks, however, rose, aided by a 1.8% rise in May durable goods orders, a favorable earnings report from Oracle Corp.

(ORCL), and a Federal Reserve statement highlighting fresh signs of economic stability.

On Wednesday, the 30-stock Dow Jones industrial average finished lower by 23.05 points, or 0.28%, at 8,299.86.

The broad Standard & Poor's 500-stock index gained 5.84 points, or 0.65%, to 900.947.

The tech-heavy Nasdaq composite index was 27.42 points, or 1.55%, higher at 1,792.34.

Treasury yields rose, and prices fell, after the Fed statement.

The dollar index was higher.

Gold futures rose.

Crude oil futures fell despite the Energy Dept.'s weekly inventory report showing U.S.

crude oil stocks fell 3.8 million barrels.

At the conclusion of its two-day policy meeting Wednesday, the Fed maintained the target range for the federal funds rate at 0%-0.25% percent and said it "continues to anticipate that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period." The statement ran counter to the expectations of some market players that the Fed would indicate that it would begin to tighten monetary policy in the near future.

In its post-meeting statement, the policy-setting Federal Open Market Committee said that recent data suggests that the pace of economic contraction is slowing.

Conditions in financial markets have generally improved in recent months, it noted, while household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit.

The Fed noted that businesses are cutting back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales." Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability," the FOMC said.

On the inflation front, policymakers noted that the prices of energy and other commodities have recently risen.

"However, substantial resource slack is likely to dampen cost pressures, and the Committee expects that inflation will remain subdued for some time." The Fed reiterated its efforts to "support to mortgage lending and housing markets and to improve overall conditions in private credit markets" buy purchasing agency and Treasury securities.

It said it will continue to evaluate the timing and overall amounts of its purchases of securities in light of the evolving economic outlook and conditions in financial markets.

The committee decision was unanimous.

"About the only difference between Wednesday's statement and the Apr.

29 statement is that the concern over deflation was removed," notes Action Economics, although the Fed did add the statement that "substantial resource slack is likely to dampen cost pressures." There were no hints of an exit strategy from the Fed's current policy path, notes Action Economics.

"[T]he economic data have been on an improving trend and we think Bernanke will use his July 21 Humphrey-Hawkins appearance to hammer home his expectations about rates being unchanged well into 2010," wrote John Ryding and Conrad DeQuadros of RDQ Economics in a note Wednesday.

The Fed sought to hide its extensive involvement and concerns about Bank of America's (BAC) acquisition of Merrill Lynch amid the latter's worsening financial condition, Rep.

Darrell Issa of the House Oversight and Government Reform Committee said.

"The committee has already learned that Ben Bernanke and the Federal Reserve made inappropriate threats to fire Bank of America management unless they went ahead with the 'shotgun wedding' that was the Merrill Lynch acquisition," Issa said in a statement released to Reuters.

"The Federal Reserve also engaged in a cover-up and deliberately hid concerns and pertinent details regarding the merger from other federal regulatory agencies," the statement said.

The committee has obtained a number of emails and documents from the U.S.

central bank about its behind-the-scenes role in the merger, according to sources familiar with documents.
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