Stocks fall on fears of Fed taper


Stocks are down this morning as investors remain on guard about the risk of higher interest rates.

S&P 500 futures are falling by about 0.5 percent and near their lows of the session, while European indexes are down as much as 1 percent. Asia also fell overnight, led by a 2 percent drop in China, after the Communist Party failed to present detailed plans for economic reform. The weakness overseas follows a pattern of outperformance by the United States that has emerged in the last month.

After a blistering rally in mid-October, the S&P 500 has traded in a 30-point range near record highs for the last three weeks. During that time, investors have absorbed corporate earnings and data showing that the economy continues to strengthen.

The big question now is when the Federal Reserve will stop buying bonds, which has kept interest rates low. That focuses attention on Fed Vice Chair Janet Yellen's testimony  in the Senate at 10 a.m. ET tomorrow. Her appearance is especially important because she's been nominated as the next head of the central bank.

No other important economic events are on the calendar, although technology giant Cisco Systems reports earnings after the closing bell tonight.

Our researchLAB market scanner shows industrials and technology stocks, less affected by higher rates,
outperforming the broader market in the last two weeks. Groups such as 3-D printing, firearms, solar energy, railroad suppliers, car-rental stocks, and retail brokerages have also led.

Commodities are mixed today, with oil higher and copper lower. Brent crude is also up more than West Texas Intermediate, which could support refinery stocks. Precious metals are little-changed, and agricultural products are mixed.

Foreign-exchange trading is cautious as the euro declines slightly and the Japanese yen posts small gains across the board.

In company-specific news, bond insurer MBIA could be active after reporting better-than-expected earnings. Canadian Solar is also up about 3 percent on a strong quarterly report.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

Copyright © 2010 OptionMonster® Holdings, Inc. All Rights Reserved.

This article appears in: Investing , Options

Referenced Stocks: SPX



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