March 3 (Bloomberg) -- U.S. stocks retreated for a fifth day as Federal Reserve Chairman Ben S. Bernanke said the banking system still hasn’t stabilized, offsetting gains in commodity shares on speculation China will boost demand for raw materials.
“The prevailing mood now is that the government doesn’t have enough bullets to deal with the problem,” said Hayes Miller, who helps manage $30.4 billion at Baring Asset Management Inc. in Boston. “There are too many uncertainties and I don’t think any particular plan is going to wipe the slate clean.”
Rally Reversed
The early rally was erased after Bernanke, testifying before the Senate Budget Committee, spurred concern that the government won’t be able to shore up a financial system battered by $1.1 trillion in global credit losses.
“Those comments that we clearly haven’t stabilized are clearly taking the market down,” said Michael Nasto, the senior trader at U.S. Global Investors Inc., which manages $2 billion in San Antonio.
Financials Retreat
Bernanke and his colleagues, after cutting the Fed’s benchmark interest rates almost to zero, are counting on the Term Asset-Backed Securities Loan Facility to help revive credit and end what may become the deepest U.S. recession since World War II.
Bernanke said policy makers may need to expand aid to the banking system beyond the $700 billion already approved and take other aggressive measures even at the cost of soaring fiscal deficits, according to his Senate testimony.
‘Skepticism Reigns’
“Skepticism reigns supreme right now,” said William Dwyer, senior investment office at Baltimore-based MTB Investment Advisors Inc., which oversees $24 billion. “I don’t see any sustained recovery in the near term. We haven’t even cleared out the bad asset on the financial side.” more...
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