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Wall Street pauses after Bernanke's comments


10:42, November 21, 2012

NEW YORK, Nov. 20 (Xinhua) -- U.S. stocks ended flat on Tuesday after the Federal Reserve Chairman Ben Bernanke warned that the central bank lacks the tools to cushion the economy from the impact of the "fiscal cliff."

When the market closed, the Dow Jones industrial average dipped 7.45 points, or 0.06 percent, to 12,788.51. The Standard & Poor's 500 added 0.93 points, or 0.07 percent, to 1,387.82. The Nasdaq Composite Index edged up 0.61 points, or 0.02 percent, to 2,916.68.

Stocks staged a sharp rally in last two sessions, boosted by positive comments from congressional leaders, which make investors confident that a deal will be reached to avert the fiscal disaster, a combination of automatic spending cuts and spikes in tax rates that could dragged the U.S. economy into a severe recession.

However, enthusiasm faded after Bernanke's warning about the dire consequences of the looming "fiscal cliff".

"The realization of all of the automatic tax increases and spending cuts that make up the fiscal cliff, absent offsetting changes, would pose a substantial threat to the recovery," Bernanke said. "A fiscal shock of that size would send the economy toppling back into recession." According to Bernanke, in the worst case scenario where the economy goes off the broad fiscal cliff, the Fed does not have the tools to offset that.

Adding to the pressure, Moody's Investors Service downgraded France's government bond rating by one notch from Aaa to Aa1, and maintained the negative outlook.

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