After Market: Taper Fears Rein in Eager Investors; Merger OK Lifts Airlines

Stocks retreated Tuesday on new worries the Federal Reserve is ready to tap the brakes on the economy. Two regional Fed presidents indicated in separate interviews that the Fed is nearing the point when it begins to trim how much stimulus money it provides each month: Atlanta Fed President Dennis Lockhart said the tapering could start as soon as next month. Dallas Federal Reserve President Richard Fisher likewise suggested investors get ready for a taper, though he emphasized that wider monetary policy would stay loose for the time being.

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The Dow Jones industrial average (^DJI) fell 32 points to 15,751. The S&P 500 (^GPSC) lost 4 to close at 1,768, and the Nasdaq (^IXIC) closed flat at 3,920.

Airline stocks soared above the rest of the market, after the Justice Department agreed to a compromise that will allow American Air and U.S. Airways (LCC) to complete their 16-billion dollar merger.

The Justice Department had sought to block the deal on antitrust grounds, concerned it would reduce competition. The two carriers agreed to mitigate that fear by selling slots at Washington's Reagan National, LaGuardia in New York, and five other big city airports.

%VIRTUAL-article-sponsoredlinks%Shares of American, which is still operating in bankruptcy, soared 25 percent, though it still trades below $2.50 a share. U.S. Airways edged up 1 percent and other carriers rallied. United (UAL) rose 4 percent, Delta (DAL) gained 2 percent and JetBlue (JBLU) jumped 6 percent.

Dish Network (DISH) gained 6 percent. The company swung to a profit last quarter and added subscribers for its satellite TV service.

On the Downside:

  • The luxury carmaker Tesla (TSLA) lost 4 percent on unconfirmed reports it may face a recall after several fires that may be tied to its electric battery. But the company says that's not true.

  • The cloud computing firm Rackspace (RAX) slid 12 percent after earnings bad missed expectations.

  • And the day's big loser was Sarepta Therapeutics (SRPT). Its shares plunged 64 percent as the FDA raised doubts about a drug trial to test its product to treat a form of muscular dystrophy. The agency indicates that a larger trial may been needed, and that could take a lot of time.

- Produced by Drew Trachtenberg.