Daily Data Flow: U.S. Stocks Fall; Fed Continues Easing; HSBC in Trouble

U.S. Stocks Erase Gain on Concern Fed Can’t Offset Cliff (Bloomberg)
U.S. stocks erased gains as Federal Reserve Chairman Ben S. Bernanke said the central bank can’t offset the full effect of the fiscal cliff, damping optimism about the Fed’s plan to buy more Treasuries. “Traders have been poking holes in some of the Fed comments,” Michael James, a managing director of equity trading at Wedbush Securities Inc. in Los Angeles, said in an e-mail. “Nothing hugely ‘negative,’ just reason to be doing some selling with the strength we’ve had in the last couple days. Markets are very thin right now and subject to bigger swings this week.”

Fed to Keep Easing, Sets Target for Rates (CNBC)
The Federal Reserve met market expectations Wednesday with another round of easing, this time with a pledge to keep interest rates low until unemployment falls below 6.5% and inflation tops 2.5%. Coupled with its move to buy $40 billion of mortgage-backed securities a month, that would bring the Fed balance sheet expansion to another trillion dollars or so in 2013 and $4 trillion overall. Fed Chairman Ben Bernanke pointed out at an afternoon news conference that even after the employment and inflation targets are triggered, that won’t lead to an automatic raising of rates.

How HSBC Allegedly Became the ‘Preferred’ Bank for Mexican Drug Cartels (Marketwatch)
HSBC Holdings PLC reached a landmark $1.9 billion settlement with U.S. authorities over allegations that the U.K-based big bank intentionally permitted illegal transactions with a variety of countries including Iran, Libya, Sudan and Burma. Documents released Tuesday provide new details also about how HSBC allegedly became “the preferred bank” for narcotics drug cartels in Mexico and Colombia and left “dangerous gaps” that traffickers abused with major cash deposits -– all while top executives froze staffing at the bank’s anti-money-laundering unit.