Stocks Close Lower After 2009 Fed Outlook

Stocks gave up a big early advance to finish moderately lower Wednesday after the Federal Reserve reduced its economic outlook for 2009 and bank stocks sank.

According to preliminary calculations, the Dow Jones industrials fell 52.81, or 0.6 percent, to 8,422.04. The blue chips had been up as much as 117 points in early trading. The Standard & Poor's 500 index slipped 4.66, or 0.5 percent, to 903.47, and the Nasdaq composite index fell 6.70, or 0.4 percent, to 1,727.84.

The central bank said it expects some business conditions to improve in coming months, but it also lowered its assessment of the economy for the full year and said unemployment could reach nearly 10 percent.

"They're saying the recovery itself may not be as robust as what people are talking about," said Doug Roberts, chief investment strategist at ChannelCapitalResearch.com. "They're saying that the unemployment rate is going to be above where they initially forecast it."

Stocks had been fluctuating throughout much of the afternoon Wednesday as rising commodity prices drove energy and material stocks higher, while bank stocks gave up early gains.

Energy stocks showed some of the biggest gains after oil topped $62 a barrel for the first time since November. But financials turned lower after enthusiasm about Bank of America Corp.'s ability to raise billions of dollars by selling stock couldn't erase fears that banks are still a long way from scrubbing all the stains off their balance sheets.

"There is some uncertainty about the financials as a sector and people are a little bit leery about getting too involved with them," said Doreen Mogavero, president of Mogavero, Lee & Co. in New York.