Stocks stumble as Fed taper factored
NEW YORK — U.S. stocks ended sharply lower Wednesday, losing grip on a late-afternoon recovery, as investors weighed the Federal Reserve’s signaling that it remained on course to curb its monthly bond purchases by the end of the year.
Fed officials are “broadly comfortable” with Chairman Ben Bernanke’s plan to begin reducing the asset buying later this year so long as the economy improves, with a few Federal Open Market Committee members indicating tapering might be called for soon, according to the minutes released Wednesday afternoon.
“The market has not fully backed in the prospect of it actually occurring in September,” said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
Extending losses into a sixth session, the Dow industrials fell as much as 122.15 points in the immediate of the Fed release, only to recoup those losses and then give them up once more. Finishing below 15,000 for the first time since July 3, the Dow Jones industrial average ended at 14,897.55, down 105.44 points, or 0.7 percent.
The Standard & Poor’s 500 index lost 9.55 points, or 0.6 percent, to 1,642.80.
The expectation voiced by Bernanke in June that the central bank would curb its $85 billion in monthly bond purchases by year-end has upended global markets, especially hitting emerging markets, which had gained significantly from the increased liquidity.
Views that Federal Open Market Committee would signal a September taper hit currencies including the Turkish lira and Indian rupee.
“I’m inclined to think it’s going to come in September, but it’s also going to be tapering ‘lite,’ ” said Luschini, who now put the odds of the reduced asset purchases coming next month at 60 percent to 70 percent.
“Net-net, the market remains jittery, and will trade from economic-data point to economic-data point. The big one is going to be the labor report that comes out before the next Fed meeting,” he added of the monthly nonfarm payrolls report.
Benchmark 10-year Treasury yields rose 8 basis point to 2.895 percent.
Staples Inc. fell 15 percent after the office-supply retailer reported disappointing results and trimmed its 2013 earnings and revenue forecasts.
Lowe’s Cos Inc. rallied 3.9 percent after the home-improvement chain reported a larger-than-estimated rise in quarterly profit and sales and raised its yearly outlook.
Shares of Target Corp. slipped 3.6 percent after the discount retailer reported a drop in second-quarter profit.
“Retailers are still missing expectations on average by 0.7 percent, largely due to several huge negative surprises in the department-store space,” said Ken Perkins, president of Retail Metrics Inc.
The Nasdaq composite index retreated 13.80 points, or 0.4 percent, to 3,599.79.
Equities are suffering from “buyers’ fatigue. The market shot up to 1,700 and change on the S&P 500, and now it’s having to reconcile having gotten a little ahead of itself,” said Luschini.
Stock indexes had held their mostly lower positions after data showed the sale of previously owned homes in July rising to 2009 highs.
“The Fed is just trumping everything right now. The news was good, but the housing-recovery story is pretty well understood at this juncture,” Luschini said of Wall Street’s lack of reaction to the housing report.
On the New York Mercantile Exchange, crude-oil futures for October delivery slipped $1.26, or 1.2 percent, to $103.85 a barrel; gold futures for December delivery lost $2.50, or 0.2 percent, to $1,370.10 an ounce.
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