U.S. stocks fall on Fed minutes; Dow slides 0.56%


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Investing.com - U.S. stocks fell on Wednesday after the Federal Reserve said in the minutes of its January policy meeting released earlier that it will likely continue dismantling its monthly bond-buying program this year.

Stimulus tools such as the Fed's $65 billion in monthly bond purchases boost stocks by suppressing long-term borrowing costs, and talk of their tapering can water down equities by fueling uncertainty as to how Wall Street will perform without a monetary crutch.

At the close of U.S. trading, the Dow Jones Industrial Average fell 0.56%, the S&P 500 index fell 0.65%, while the Nasdaq Composite index fell 0.82%.

At its Jan. 28-29 policy meeting, the Fed voted to trim its monthly asset purchasing program to $65 billion from $75 billion and stressed benchmark interest rates will stay at 0.00-0.25% until the unemployment rates approaches 6.5% or even dips below that mark, depending on the health of the economy in the context of price stability.

The minutes released on Wednesday, however, revealed that monetary authorities debated ditching plans to hike rates if the unemployment rate falls past 6.5%, a policy tool known as forward guidance.

"Participants agreed that, with the unemployment rate approaching 6-1/2 percent, it would soon be appropriate for the Committee to change its forward guidance in order to provide information about its decisions regarding the federal funds rate after that threshold was crossed," the minutes reported.

The unemployment rate currently stands at 6.6% though many still have left the labor force due to fruitless job searches, which artificially lowers the percentage headline unemployment rate.

Those out of work but not actively seeking jobs are not counted as part of the labor force.

Elsewhere, Fed officials were willing to overlook January's soft jobs report and other economic indicators taking into account a string of powerful winter storms may have disrupted commerce.

While some hawkish member felt the time to hike interest rates will come soon, consensus pointed to keeping rates on hold while dismantling monthly bond purchases, which sparked selling in U.S. stock markets.

"All members agreed that the cumulative improvement in labor market conditions and the likelihood of continuing improvement indicated that it would be appropriate to make a further measured reduction in the pace of its asset purchases at this meeting," the minutes read.

"Members again judged that, if the economy continued to develop as anticipated, further reductions would be undertaken in measured steps."

Elsewhere on Wednesday, the Commerce Department reported that U.S. housing starts fell 16% in January to 880,000 units, outpacing expectations for a 5.7% drop, though a series of winter storms may have weakened the indicator and not a downtick in demand.

The number of building permits issued last month declined by 5.4% to a seasonally adjusted 937,000 units, outpacing expectations for a 1.8% decline.

A separate report revealed that the U.S. producer price index rose 0.2% last month, beating forecasts for a 0.1% gain, while core producer prices were also up 0.2%.

Violence in the Ukraine as well as news that the Department of Homeland Security has informed airlines to be on the lookout for new shoe-bomb type of threat fueled the selloff as well.

Leading Dow Jones Industrial Average performers included Verizon, up 1.22%, Chevron, up 0.80%, and United Technologies, up 0.29%.

The Dow Jones Industrial Average's worst performers included JPMorgan, down 2.09%, Boeing, down 1.73%, and Home Depot, down 1.45%.

European indices, meanwhile, finished l higher.

After the close of European trade, the EURO STOXX 50 rose 0.07%, France's CAC 40 rose 0.24%, while Germany's DAX 30 rose 0.07%. Meanwhile, in the U.K. the FTSE 100 rose 0.01%.

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This article appears in: Investing , Forex and Currencies

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