(Bloomberg) — Stocks fell after the Federal Reserve signaled that a decision on a reduction of its massive bond-buying program could happen in 2021. Treasuries and the dollar were little changed.
The S&P 500 extended losses into a second day after minutes of the Fed’s July gathering showed that most officials agreed they could start tapering this year as they had hit their inflation goal and were closer to reaching their standard for progress on reducing unemployment.
“The minutes reflect a Fed that is prepared to accelerate its taper timeline to perhaps the next few months,” said Sean Bandazian, an investment analyst at Cornerstone Wealth. “There is still reason to believe we will see volatility throughout areas of the market with high sensitivity to interest rates.”
More comments:
“Fed tapering is clearly in training camp mode, with Jackson Hole likely being a preseason game, and either the September or most likely the November FOMC meeting being the time to announce how they will pullback stimulus,” wrote Edward Moya, senior market analyst at Oanda.“It’s clear from the minutes that the Fed isn’t ready to start tapering yet, but they are leaning towards making an announcement by the end of the year at the latest,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.“While the Fed minutes reveal more conviction in terms of starting to taper this year, they made the bold point that there’s no connection between tapering and rate hikes,” wrote Mike Loewengart, managing director of investment strategy at E*Trade Financial.
Earlier Wednesday, St. Louis Fed President James Bullard said he would like to see the tapering of the asset-purchase program done by the first quarter of 2022. Several other officials, including Robert Kaplan of Dallas and Esther George of Kansas City, have urged the central bank to begin removing stimulus as soon as the September meeting. Chair Jerome Powell and Vice Chairman Richard Clarida have suggested they would like to see further progress before considering a move to taper.
Among the corporate highlights, Target Corp. slipped after the retailer’s sales growth slowed in the second quarter, hinting that the heightened consumer demand ushered in by the pandemic may be waning. Lowe’s Cos. jumped as the home-improvement giant raised its full-year forecast.
Elsewhere, oil dropped below $65 a barrel for the first time since May 24 as new waves of Covid-19 threatened fuel demand.
Read: CME Denies Report It Made $16 Billion Takeover Bid for CBOE
Here are some events to watch this week:
Bank Indonesia rate decision and Governor Perry Warjiyo briefing ThursdayU.S. initial jobless claims, leading index Thursday
Some of the main moves in markets:
Stocks
The S&P 500 fell 1.1% as of 4 p.m. New York timeThe Nasdaq 100 fell 1%The Dow Jones Industrial Average fell 1.1%The MSCI World index fell 0.6%
Currencies
The Bloomberg Dollar Spot Index was little changedThe euro was little changed at $1.1713The British pound rose 0.1% to $1.3758The Japanese yen fell 0.2% to 109.78 per dollar
Bonds
The yield on 10-year Treasuries advanced one basis point to 1.27%Germany’s 10-year yield declined one basis point to -0.48%Britain’s 10-year yield was little changed at 0.57%
Commodities
West Texas Intermediate crude fell 2.5% to $64.90 a barrelGold futures were little changed
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