Stocks Baked as Bernanke Yaks
NEW YORK (TheStreet) -- Major U.S. stock averages reversed gains in the final hour of trades on Wednesday as Federal Reserve Chairman Ben Bernanke answered reporters' questions.
The drop came despite an earlier spike in the major indices after the central bank fulfilled the wishes of the markets for a fresh round of stimulus.
After the two-day meeting of the Federal Open Market Committee -- the Federal Reserve's rate-setting arm -- policy makers announced they will replace Operation Twist, which expires at the end of the year, with the purchase of longer-term Treasury securities initially at a pace of $45 billion a month. This would be in addition to its ongoing purchases of additional agency mortgage-backed securities at a pace of $40 billion a month.
Also, policymakers decided to keep the target range for the federal funds rate at an exceptionally low zero to 0.25% as long as the jobless rate remains above 6.5%, inflation expectations for the next one to two years stay subdued and longer-term inflation projections continue to be tame.
Prior to the announcement, major equity averages were trimming gains in late morning trading amid signs of discord in the U.S. fiscal cliff negotiations.
House Speaker John Boehner on Wednesday criticized President Barack Obama's most recent budget plans as unbalanced and focusing too much on tax rate hikes, according to The Wall Street Journal.
"His plan does not fulfill his promise to bring a balanced approach to solving this problem -- it's mainly tax hikes," said Boehner, according to the Journal. "His plan does not begin to solve our debt crisis, it actually increases spending."
Obama indicated Tuesday evening that he's optimistic a deal will be reached with congressional Republicans.
Obama has softened his stance on tax increases, lowering his counteroffer in tax revenue to $1.4 trillion over a decade from $1.6 trillion.
The Dow Jones Industrial Average rose 3 points, or 0.02%, to 13,245.