U.S. Stocks Fall As Fed Talks Timing of Taper
U.S. stocks extended losses into a second day Tuesday as Federal Reserve official Charles Evans said the economy should be able to shoulder reduced Fed asset purchases later this year.
“It’s more of this taper tempest that we seem to go into. The market gets a little confused; it seems fine as long as the talk around taper is around data, but it gets flustered when you talk about the calendar,” said Jim Dunigan, managing executive for investments at PNC Wealth Management.
“There appears to be a lot on our plates as we get into fall season, with budget talks, a new Fed chair and the debt ceiling, which might lead the market to churn here a bit,” said Dunigan, who added that the market has reached an inflection point, given its “fairly significant upside performance,” with the S&P 500 up 19% so far this year.
After falling 139 points, the Dow Jones Industrial Average DJIA -0.60% shed 93.39 points, or 0.6%, to end at 15,518.74, with International Business Machine Corp. IBM -2.31% leading the decline that included 24 of the Dow’s 30 components.
IBM’s IBM -2.31% shares fell 2.3% after the computer-services company reportedly said U.S. employees in its hardware unit would take a week furlough with reduced pay in August and after Credit Suisse downgraded the tech giant to underperform from neutral.
The S&P 500 index SPX -0.57% fell 9.77 points, or 0.6%, to 1,697.37, with materials pacing broad sector declines. The Nasdaq Composite COMP -0.74% shed 27.18 points, or 0.7%, to 3,665.77.
For every stock rising, roughly three fell on the New York Stock Exchange, where 658 million shares traded. Composite volume cleared 3.1 billion.
Treasury prices were little changed, with the yield on the benchmark 10-year note 10_YEAR -0.91% holding steady at 2.64%.
The dollar DXY +0.10% fell against the currencies of major U.S. trading partners, including the Japanese yen USDJPY -0.80% and the euro EURUSD -0.15% .
Crude-oil futures CLU3 +0.04% declined $1.26, or 1.2%, to $105.30 a barrel and gold futures GCZ3 -0.39% slid $19.90, or 1.5%, to $1,282.50 an ounce on the New York Mercantile Exchange.
Data showed Tuesday that the U.S. trade gap narrowed in June to $34.2 billion from $44.1 billion in May, coming in below expectations of $43 billion. Separately, job openings rose to 3.94 million in June from 3.91 million in May, the U.S. Department of Labor reported.
“If exports are improving, things in Europe seem to be getting better, so maybe it’s coming out of recession, and maybe China isn’t as bad as the headlines would suggest,” said PNC’s Dunigan.
Moving Issues
Results from retailers also disappointed investors, with American Eagle Outfitters Inc. AEO -12.02% sliding 12% a day after the teen-apparel retailer slashed its second-quarter outlook.
CVS Caremark Corp. CVS -2.81% dropped 2.8% after the provider of prescription drugs cut the top end of its 2013 adjusted earnings target.
J.C. Penney Co. JCP -3.91% retreated 3.9%.
Bucking the negative trend, Fossil Group Inc. FOSL +17.81% rose nearly 18% after the fashion-accessories supplier reported better-than-expected results and raised its 2013 earnings forecast.
Amazon.com Inc. AMZN -0.08% CEO Jeff Bezos said late Monday he’s buying the newspaper-publishing business of the Washington Post WPO +4.27% for $250 million. Shares of the Post, 28% of which is owned by Warren Buffett, gained 4.3%.
Fed Timing
Evans, president of the Chicago Fed, expects growth in the second half of the year to pick up to an annual rate of 2.5% and climb above 3% next year. The central bank could then taper its asset purchases in several stages, and likely end them by mid-2014, said Evans, who is a voting member of the Federal Open Market Committee.
“We will hear more of this type of talk from Fed members as they do their verbal best to soften the market impact of a growing likelihood of a fall taper,” emailed Peter Boockvar, chief market analyst at the Lindsey Group
Evans spoke to reporters in Chicago after Dennis Lockhart, president of the Federal Reserve Bank of Atlanta, told Market News International the Fed could start curtailing its bond-buying program at any of the three remaining FOMC meetings this year.
U.S. stocks finished mostly lower on Monday after a better-than-expected report on services-sector growth and remarks by Dallas Fed Bank President Richard Fisher that the central bank is closer to tapering its bond purchases.
Source: Marketwatch
