Wall Street flat as stalemate counters relief over Yellen

[KingsOfTheDay]

Wall Street flat as stalemate counters relief over Yellen

Traders work on the floor of the New York Stock Exchange, October 7, 2013. REUTERS-Brendan McDermid

By Chuck Mikolajczak
NEW YORK | Wed Oct 9, 2013 10:39am EDT

(Reuters) - U.S. stocks were little changed on Wednesday, as expectations that Janet Yellen will be tapped as the next head of the U.S. Federal Reserve were tempered by the stalemated fiscal negotiations in Washington.

U.S. President Barack Obama will nominate Yellen, who is currently the No. 2 at the Fed, on Wednesday at the White House at 3 p.m. (1900 GMT), a White House official said.

Investors expect her to tread carefully in winding down economic stimulus, and to provide continuity with the policies established under Fed Chairman Ben Bernanke, whose second term is due to expire on January 31.

"The markets are finding consolation in Yellen's expected nomination because that at least puts the monetary policy on a more certain, or at least, a more familiar path," said Anastasia Amoroso, Global Market Strategist at J.P. Morgan Funds in New York.

"It does remove another hurdle, another piece of the puzzle, another piece of uncertainty that the market likes to see resolved."

The S&P 500 .SPX dropped 1.2 percent on Tuesday, its worst decline since August 27, sending the benchmark index to its lowest level since September 6 as traders cashed in gains in some of the year's best performers.

The trend among high-flying stocks continued on Wednesday and weighed heavily on the Nasdaq, with stocks such as Amazon.com (AMZN.O), Facebook (FB.O), and Tesla Motors Inc (TSLA.O), each of which had recently hit 2013 highs, among the weakest performers on the index.

In Washington, Obama said he would not hold talks on ways to end the fiscal impasse while under threat from conservative Republicans, but agreed to discuss anything, including his healthcare plan, if they restore government funding and raise the debt limit.

"From a market perspective, obviously the longer the shutdown continues and the more it bleeds into the debt ceiling debate, the more the compelling the reason to sell becomes," said Amoroso.

The crisis in Washington threatens to damage the fiscal standing of the United States and to derail its fragile economic recovery.

The Dow Jones industrial average .DJI rose 0.89 points or 0.01 percent, to 14,777.42, the S&P 500 .SPX lost 0.72 points or 0.04 percent, to 1,654.73 and the Nasdaq Composite .IXIC dropped 24.955 points or 0.68 percent, to 3,669.879.

Alcoa Inc (AA.N) climbed 3.9 percent to $8.25 after the aluminum producer reported better than expected earnings, as strength at the unit that sells auto parts and other complex items helped offset lower metal prices.

Yum! Brands Inc (YUM.N) slumped 7.7 percent to $66.85 as both the worst performer and biggest drag on the S&P 500 after the KFC parent warned it will take longer than expected for restaurant sales to rebound in China, which accounts for more than half the company's overall operating profit.

Costco Wholesale Corp (COST.O) slipped 1.4 percent to $110.69 after the retailer posted a 1 percent rise in quarterly profit and a 3 percent increase in its same-store sales for the month of September.

According to Thomson Reuters data, third-quarter earnings are expected to grow 4.3 percent, and revenue 3 percent.

Men's Wearhouse (MW.N) rose 23.4 percent to $43.47 after it rejected smaller rival Jos. A. Bank Clothiers Inc's (JOSB.O) $2.3 billion takeover offer, saying it significantly undervalued the company and could raise antitrust issues. Jos. A. Bank shares rose 5.9 percent to $44.13.

Ariad Pharmaceuticals Inc (ARIA.O) shares plunged 70.1 percent to $5.12 after the company said the U.S. Food and Drug Administration had placed a partial hold on patient enrollment for trials of its cancer drug Iclusig. The Nasdaq biotech index .NBI dropped 2 percent.

(Editing by Bernadette Baum and Kenneth Barry)