Federal Reserve, glitches push stocks lower

NEW YORK -- There was more than one story line playing out in the stock market Wednesday.

The market wavered between gains and losses for much of the day, yanked around by technical problems, an ambiguous statement from the Federal Reserve, and mixed reports on U.S. companies that made it difficult to decipher just where the economy is headed.

By the time it was all over, all the key indexes were down, their third straight day of losses. The euphoria of late last week, when investors celebrated after European leaders promised to keep the eurozone intact, seemed a distant memory.

The Dow Jones industrial average shed 32.55 points to 12,976.13. The Standard & Poor's 500 fell four points to 1,375.32. And the Nasdaq composite index lost 19.31 points to 2,920.21.

Here's a look at the key developments Wednesday:

--THE ECONOMY

For every hint that the economy is improving, another cropped up to indicate that it isn't.

Chrysler, Volkswagen and Nissan reported strong sales in July -- but General Motors and Ford faltered.

Construction spending rose for the third month in a row, according to one closely watched report, but manufacturing activity shrank, according to another.

The cable company Comcast jumped 3 percent after beating analysts' expectations for second-quarter earnings, but Avon lost 1 percent, after missing them. Comcast finished up $1 at $33.55. Avon lost 19 cents to $15.30.

Zahid Siddique, portfolio manager at Gamco in Rye, N.Y., captured the mood simply: "We have a couple of positives," he said, "offset by a couple of negatives."

--TRADING GLITCHES

The opening minutes of trading were chaotic for some companies, with their shares swinging wildly for no immediately apparent reason. Abercrombie & Fitch, for example, jumped 9 percent in early trading, and Harley-Davidson sank 12 percent, before stabilizing.

The culprit was an unspecified problem at Knight Capital, one of the largest processors of stock trades. The New York Stock Exchange, where the shares are traded, eventually decided to cancel some trades in six smaller stocks.

Among traders, the problems brought unwelcome reminders of previous technological problems that have damaged investors' faith in the financial system, including technical problems on the Nasdaq stock exchange when Facebook went public in May.

"These have happened not once but a number of times, and unless they're addressed they'll continue to happen," said Matthew Rubin, director of investment strategy at Neuberger Berman in New York. "I think it's one of many, many things that has rattled investors' faith in the equity markets."

--THE FED

The Federal Reserve issued a statement Wednesday afternoon after wrapping up a two-day policy meeting, as is customary.

But investors hoping for clarity were disappointed.

Investors' reaction to the Fed statements can be a perverse equation. Some investors want the Fed to say that the economy is doing poorly -- poorly enough to persuade the Fed to take more action to try to get it going again.

Instead, policymakers acknowledged that the economy has ebbed so far this year, but pledged merely to take further steps in the future if necessary.

But there are also doubts as to whether the Fed has any arrows left in its quiver. It can lower interest rates to try to spur borrowing, but rates are already at historic lows. It can buy bonds to try to drive investors into stocks, but the effect on the fundamentals of the economy are debatable.

Matt Ballew, chairman of Security Ballew Wealth Management in Jackson, Miss., thinks that only more-responsible spending policies will help.

"What the central banks can do from this point on is meaningless," Ballew said. "They can make it worse, but they can't make it better."

Thursday, investors will be watching for statements from the European Central Bank meeting. Investors are anxious to know if European leaders have some concrete plan to tame the continent's debt crisis, or merely good intentions.