After Fed announcement, stocks turn lower

Stocks turned lower Wednesday afternoon after the Federal Reserve decided against taking any new steps to pump money into the economy.

The Dow Jones industrial average and the Standard & Poor’s 500, which had held onto tiny gains for most the day, both fell into the red after the Fed’s announcement at 2:15 p.m. The Nasdaq composite index, which was already down for the day, fell even more.

Investors had hoped that the Fed might announce some concrete new plans for greasing the economy’s skids. Instead, policymakers merely pledged to take further steps in the future, if high unemployment continues to gnaw away any hope of a sustained recovery. The Fed also said the economy was losing strength.

The Fed was one of several story lines playing out on the stock market Wednesday. Early in the morning, some stocks swung wildly on unusually high trading volume, after what appeared to be technical miscues. The New York Stock Exchange said it was investigating unusual trades in 140 stocks.

And for much of the morning, disparate signs about the U.S. economy and company earnings kept the market in a state of indecision. For every hint that the economy was improving, another cropped up to indicate that it isn’t. Construction was up; manufacturing, down. Car sales were strong — until wait, they weren’t.

“We have a couple of positives,” said Zahid Siddique, portfolio manager at Gamco in Rye, N.Y., “offset by a couple of negatives.”

Despite its inaction, the Fed was quick to offer a dour view of the economy’s current condition. Its assessment? Economic activity has slowed over the first half of the year, unemployment remains elevated, and consumer spending has weakened.

In a way, investors want to hear a discouraging report from the Fed. It can seem like perverse math, but the more convinced the Fed is that the economy is suffering, the more likely it is to take action.

“The Fed has made a very strong effort to keep the economy out of recession,” said Matthew Rubin, director of investment strategy at Neuberger Berman in New York. “At the end of the day it’s unfortunate, because in many ways it doesn’t feel like it’s enough.”

News on U.S. companies and the economy was mixed.

Chrysler, Volkswagen and Nissan reported strong sales in July, but General Motors and Ford faltered. Harley-Davidson lost 49 cents to $42.73 after missing sales expectations.

The cable company Comcast jumped 3 percent, rising $1.02 to $33.57, after beating analysts’ second-quarter earnings forecasts. Avon lost 2 percent, slipping 31 cents to $15.18 after missing expectations for both earnings and sales.

The government reported that the U.S. construction spending rose for the third straight month. At the same time, the Institute for Supply Management trade group reported that manufacturing shrank for the second straight month.

Siddique was underwhelmed by the positive move in construction spending. He figures it’s not enough to offset other problems in the economy. “It’s nothing to write home about,” Siddique said.

In the late afternoon, the Dow was down 15 points to 12,995. The S&P 500 was down a point to 1,378. The Nasdaq composite slipped nine points to 2,931.

Another key development that could influence the markets comes Thursday, when the European Central Bank meets. Investors are anxious to know if European leaders have some concrete plan to tame the continent’s debt crisis, or merely good intentions.