Benchmarks eroded the day's gains after Federal Reserve
minutes suggested that tapering may begin in the in "coming
months". However, the timing of the action depends on what
economic conditions suggest going forward. The day marked the
S&P 500's third-straight fall while the blue-chip index moved
still further from its 16,000 mark. The healthcare sector was the
only gainer among the S&P 500 industry groups while utilities
stocks incurred the highest losses.
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Ahead of Wall Street
The Dow Jones Industrial Average (DJI) slipped 0.4% to close the
day at 15,900.82. The S&P 500 also dropped 0.4% to finish
yesterday's trading session at 1,781.37. The tech-laden Nasdaq
Composite Index declined 0.3% to end at 3,921.27. The fear-gauge
CBOE Volatility Index (VIX) edged up 0.07% to settle at 13.40.
Consolidated volumes on the New York Stock Exchange were roughly
3.1 billion shares. Declining stocks outnumbered the advancers.
For 65% shares that declined, 32% advanced.
Stocks moved lower on Wednesday following the release of Fed
minutes which suggested that a steady improvement in economic
conditions may prompt the central bank to taper its $85 billion
bond repurchase plan in coming months. The Federal Open Market
Committee's meeting held on October 29 and 30 observed that the
economic data will "prove consistent with the committee's outlook
for ongoing improvement in labor market conditions and would thus
warrant trimming the pact of purchases in coming months."
The minutes noted: "Many members stressed the data-dependent
nature of the current asset-purchase program…Some pointed out
that, if economic conditions warranted, the Committee could
decide to slow the pace of purchases at one of its next few
Last Thursday, Janet Yellen had said: "I believe that supporting
the recovery today is the surest path to returning to a more
normal approach to monetary policy…I consider it imperative that
we do what we can to promote a strong recovery". Speaking at a
hearing before the Senate Banking Committee, Yellen said:"It's
important not to remove support, especially when the recovery is
fragile and tools available to monetary policy, should the
economy falter, are limited given that short-term interest rates
are at zero."
This was followed by Ben Bernanke's comments on Tuesday wherein
he supported Yellen's stance on monetary stimulus. Bernanke said:
"The FOMC remains committed to maintaining highly accommodative
policies for as long as they are needed". "I agree with the
sentiment, expressed by my colleague Janet Yellen at her
testimony last week that the surest path to a more normal
approach to monetary policy is to do all we can today to promote
a more robust recovery," he added.
According to the US Department of Commerce, retail sales for the
month of October increased by 0.4%, compared to the consensus
estimate of an increase of 0.1%. Retail trade sales have
increased 0.3% from September and 3.9% from last year. Nonstore
retailers gained 8.2% compared to a year ago.
Separately, according to the US Department of Labor, the Consumer
Price Index (CPI) for the month of October declined 0.1%. The all
items index rose 1.0%. The index for all items less food and
energy increased 0.1%. The medical index remained unchanged,
whereas, the all items index increased 1.0% in the last twelve
months, which was the smallest yearly increase. The index for all
items less food and energy has climbed 1.7% over the last year.
The food index increased 1.3%.
The National Association of Realtors reported existing home sales
numbers. According to the report, existing home sales fell 3.2%
to a seasonally adjusted annual rate of 5.12 million in October
from 5.29 million in September. This was below the consensus
estimate of 5.15 million. NAR chief economist Lawrence Yun said:
"The erosion in buying power is dampening home sales". He added:
"Moreover, low inventory is holding back sales while at the same
time pushing up home prices in most of the country. More new home
construction is needed to help relieve the inventory pressure and
moderate price gains".
The health care sector was the only gainer among the S&P 500
industry groups and the Health Care SPDR (XLV) gained 0.3%.
Stocks such as Johnson & Johnson (NYSE:
), Pfizer Inc. (NYSE:
), Merck & Co., Inc. (NYSE:
), Gilead Sciences, Inc. (NASDAQ:
), and Amgen, Inc. (NASDAQ:
) added 0.3%, 0.8%, 0.1%, 2.0%, and 0.1%, respectively.
The utilities sector dropped the most among the S&P 500
industry groups and the Utilities SPDR (XLU) lost 1.1%. Stocks
such as Duke Energy Corp (NYSE:
), Dominion Resources, Inc. (NYSE:
), NextEra Energy, Inc. (NYSE:
), The Southern Company (NYSE:
), and Exelon Corporation (NYSE:
) lost 1.5%, 1.6%, 1.2%, 1.6%, and 0.4%, respectively.