Market Recap: Stocks Reverse Rally After Fed Keeps Rates Unchanged

Markets closed down on Wall Street today:

• Dow -0.55 percent
• S&P -0.87 percent
• Nasdaq -1.56 percent
• Oil +2.26 percent
• Gold -2.03 percent

On the commodities front:

• Oil (NYSE:USO) climbed to $99.98 a barrel
• Gold (NYSE:GLD) fell to $1,634.30 an ounce
• Silver (NYSE:SLV) fell 0.85 percent to settle at $30.74

(Related: OPEC Boosts Supply as Libyan Output Rebounds)

Today’s markets were down because:

1) Fed: Markets reversed an early rally after the Federal Reserve kept rates unchanged, warning that “strains in global financial markets continue to pose significant downside risks to the economic outlook” in minutes from a meeting of the Federal Open Market Committee.

Though it said the economy is “expanding moderately,” with some improvement in labor conditions, the Fed’s confirmation that Europe remains a real threat to U.S. economic growth, and prediction that the “unemployment rate will decline only gradually,” had investors disheartened.

2) Germany: Stocks first pulled back today after a Dow Jones report said that German Chancellor Angela Merkel had rejected suggestions to raise the funding limit for the European Stability Mechanism, which goes into effect next year and may run alongside the European Financial Stability Facility, which it is ultimately intended to replace.

Though the FOMC minutes might have had a more dramatic impact on the major U.S. indices, Germany’s news didn’t help, and was the first to rock markets that had been trading up thanks to an initial void of bad news out of Europe.

3) Retail: Retail sales for the month of November rose 0.2 percent, well below what was expected, according to the U.S. Commerce Department. However, the disappointing report had little impact. Sales were expected to have increased by 0.6 percent, following a 0.5 percent advance in October that was revised to 0.6 percent in today’s report. Instead, the November gain was the smallest since June, despite Thanksgiving weekend sales figures that topped estimates and toppled previous records.

Also, shares of electronics retailer Best Buy plummeted 15.46 percent after the company reported earnings that fell far short of forecasts.

[Editor’s note: the above is a cross post that originally appeared on Wall St. Cheat Sheet.]