Fed Gives Dour Take on Economy

Central bank said it remains ready to step in to boost growth, if needed.

Not just yet — that was the message the Ben S. Bernanke-led Federal Reserve had for investors hoping the central bank would try to kickstart quicker economic growth.


The Fed’s committee on monetary policy wrapped up its two-day meeting today with a dour reading on the economy, noting that activity had “decelerated.”


“Growth in employment has been slow in recent months, and the unemployment rate remains elevated,” the Fed said. “Business fixed investment has continued to advance. Household spending has been rising at a somewhat slower pace than earlier in the year. Despite some further signs of improvement, the housing sector remains depressed.”


Strains in the global markets, weighed down by Europe’s debt crisis, also pose risks to the outlook.


“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,” the Fed said.


Markets held relatively steady after the much-anticipated Fed meeting and the Dow Jones Industrial Average slipped back below 13,000, falling 0.3 percent, or 32.55 points, to 12,976.13. Retail stocks fared worse and the S&P Retail Index fell 1 percent, or 6.20 points, to 612.32 as trading wound down.


Leading the decline in fashion was True Religion Apparel Inc., which fell 19.6 percent to 21.11 after the company said sales this year would come in below analyst expectations. Also losing ground were Tumi Holdings Inc., down 7.1 percent to $16.77; J.C. Penney Co. Inc., 6.6 percent to $21.02; Quiksilver Inc., 5.9 percent to $2.72, and Lululemon Athletica Inc., 5.5 percent to $53.35.


Shares of American Eagle Outfitters Inc. fell 2.4 percent to $20.33, but the stock rose 6.3 percent to $21.60 in afterhours trading after the company boosted second-quarter profit guidance. The teen retailer now expects quarterly earnings of 19 cents to 21 cents a share, up from the 13 cents to 15 cents previously projected.


In Europe, markets were mixed at the close as investors digested a report showing a weaker manufacturing sector in the region and looked ahead to an update from the European Central Bank Thursday.


London’s FTSE 100 closed up 1.4 percent to 5,712.82, while Paris’ CAC 40 was up 0.9 percent to 3,321.56. Milan’s FTSE MIB climbed 0.3 percent to 13,928.59, while Frankfurt’s DAX was down 0.3 percent to 6,754.46.


The gainers included Italian eyewear maker Marcolin, up 1.6 percent to 4.60 euros; Carrefour, 1 percent to 14.73 euros, and Safilo Group, 1.9 percent to 5.33 euros.


Losing ground were Yoox, down 1.4 percent to 10.68 euros; Mulberry Group, 1.5 percent to 14.18 pounds, and Beiersdorf, 1.5 percent to 53.13 euros.


The euro traded at $1.23 while the pound went for $1.57.


Markit reported that its Purchasing Managers’ Index, or PMI, a key indicator of manufacturing output, fell to 44 from 45.1 in June. Any reading below 50 signals a contraction. The slowdown was due to falling orders and cost cutting, Markit said.


The European Central Bank will announce its latest decision on interest rates in the region Thursday, when it could make a move to start buying the bonds of indebted governments such as Spain and Italy. A buyback under the Securities Markets Program would help those countries reduce their borrowing costs.