U.S stocks fall on Fed policy uncertainty; Dow dips 0.50%

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Investing.com - U.S. stocks fell on Tuesday though they trimmed earlier losses on uncertainty over effects that a Federal Reserve scale back of stimulus measures will have on markets.

Monetary stimulus tools such as the Fed's USD85 billion monthly bond-buying program push down interest rates and flood the economy with liquidity to spur recovery, a combination that sends stock prices rising as a side effect.

At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.50%, the S&P 500 index ended down 0.55%, while the Nasdaq Composite index fell 0.58%.

Disappointing economic indicators in recent weeks have sent stocks rising by fueling hopes the Fed will keep stimulus measures in place.

By Tuesday, however, concerns began to brew that such trends may end soon, and the overall uncertainty over when the Fed scales back stimulus tools and their effects on markets kept investors out of stocks.

Elsewhere Tuesday, the Commerce Department reported that the U.S. trade gap widened 8.5% in April to USD40.3 billion from USD37.8 billion in March, though the figure did come in below estimates for a USD41 billion deficit.

U.S. imports rose 2.4% in April to USD227.7 billion, while exports increased 1.2% to USD187.4 billion.

Leading Dow Jones Industrial Average performers included Merck, up 2.06%, AT&T, up 1.71%, and Coca-Cola, up 1.54%.

The Dow Jones Industrial Average's worst performers included Home Depot, down 3.07%, Microsoft, down 1.74%, and Alcoa, down 1.53%.

European indices, meanwhile, finished higher.

After the close of European trade, the EURO STOXX 50 rose 0.29%, France's CAC 40 rose 0.13%, while Germany's DAX 30 finished up 0.12%. Meanwhile, in the U.K. the FTSE 100 finished up 0.51%.

On Wednesday, the U.S. is to release the ADP nonfarm payrolls report on private-sector job creation, as well as government data on factory orders and crude oil stockpiles.

In addition, the Institute of Supply Management is release data on U.S. service-sector activity, a leading economic indicator.

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

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

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