Stocks fluctuate after Fed says financial conditions are ‘less supportive’ of growth

Stocks zigzag after Fed says Europe is a risk

NEW YORK — Stocks fluctuated Wednesday after the Federal Reserve indicated that problems in Europe pose a threat to the economy.

The Dow Jones industrial average rose about 20 points in afternoon trading while broader indexes fell. Treasury prices rose, pushing down interest rates. The yield on the benchmark 10-year Treasury note fell to its lowest level in more than a year.

In a statement following a meeting of its policy-making committee, the Fed has said that “financial conditions have become less supportive of economic growth.” The central bank cited what it called “developments abroad” but didn’t mention Europe by name.

Stocks have fallen from 2010 highs on worries that debt problems in Europe would spread and hurt a global rebound.

The market went through the back-and-forth trading that often follows Fed statements. Traders said the Fed’s statement wasn’t a big surprise, including the assertion that the economy’s recovery is likely to be “moderate” for a time.

“The Fed is acknowledging what we’re all seeing,” said Mike Materasso, co-chair of the fixed income policy committee at Franklin Templeton. “There are problems in Europe, we’ve gotten a string of data in the U.S. with regard to employment, housing and even retail sales that is disappointing.”

Stocks fell in morning trading after new home sales dropped by a third to a record low last month. Trading stabilized ahead of the Fed statement.

The government’s report that new homes sales fell to a seasonally adjusted annual pace of 300,000 was far weaker than expected. Economists polled by Thomson Reuters had forecast sales would drop nearly 19 percent to a seasonally adjusted annual rate of 410,000.

On Tuesday, an unexpected drop in sales of existing homes also hurt stocks. Existing homes are a far bigger part of the market than new homes. Traders were braced for more bad news Wednesday.

The homebuyer’s credit expired April 30, and its absence is expected to be felt beyond the May sales figures.

In midafternoon trading, the Dow rose 20.33, or 0.2 percent, to 10,312.72. The Dow fell 149 points Tuesday after the report on home sales.

The broader Standard & Poor’s 500 index fell 2.49, or 0.2 percent, to 1,092.82, and the Nasdaq composite index fell 6.35, or 0.3 percent, to 2,255.45.