Fed meeting steals focus as markets drop slightly
NEW YORK — Nobody wanted to stick out their neck on Tuesday.
The stock market edged slightly lower as the Federal Reserve started a two-day policy meeting that may herald the beginning of the end for its economic stimulus.
Few expect that the Fed will announce it plans to pare back, or “taper,” its huge bond-buying program when its meeting wraps up on Wednesday. However, good news on the economy this month, including a blockbuster jobs report, and a budget deal in Washington appear to have increased the likelihood of a change.
“It's just the taper drama, that's really all the market seems focused on,” said Dean Junkans, CIO for Wells Fargo Private Bank. “The chances of them doing something tomorrow are higher than they were a month ago.”
Major stock indices fell, but just slightly. The Standard & Poor's 500 index eased five points, or 0.3 percent, to 1,781. The Dow Jones industrial average crept down nine points, or 0.1 percent, to 15,875.26. The Nasdaq composite edged lower by five points, or 0.1 percent, to 4,023.68.
Eight of the 10 industrial groups in the S&P 500 declined, led by phone companies. Materials stocks and technology companies edged higher.
A couple of big companies bucked the downward trend when they pledged to hand more cash to stock holders.
Boeing rose $1.16, or 1 percent, to $135.88 after the plane maker increased its stock buyback program by $10 billion and raised its dividend 52 percent. 3M climbed $3.73, or 3 percent, to $131.39 after raising its dividend by 35 percent. The company also forecast solid earnings next year.
Stocks have surged this year as the Fed kept buying $85 billion in bonds every month to hold down long-term interest rates. As well as boosting the economy, that stimulus has made stocks a more attractive investment compared to bonds.
The only setbacks for the market this year have come when investors were nervous that the Fed was about to cut back its stimulus.
The S&P 500 index dropped 1.5 percent in June when Fed Chairman Ben Bernanke outlined a potential exit for the Fed from its stimulus strategy. The index fell 3.1 percent in August when investors thought the policy would change in September.
Instead of worrying about the market's immediate reaction to the Fed's announcement on Wednesday, investors should focus on the positive backdrop for stocks, said Liz Ann Sonders, chief investment strategist at Charles Schwab.
The economy is improving, companies are investing more and earnings are forecast to grow at a steady rate, ensuring there will be demand for stocks.
“Dips that we get are not going to be terribly severe,” Sonders said.
Show commenting policy
TribLive commenting policy
You are solely responsible for your comments and by using TribLive.com you agree to our Terms of Service.
We moderate comments. Our goal is to provide substantive commentary for a general readership. By screening submissions, we provide a space where readers can share intelligent and informed commentary that enhances the quality of our news and information.
While most comments will be posted if they are on-topic and not abusive, moderating decisions are subjective. We will make them as carefully and consistently as we can. Because of the volume of reader comments, we cannot review individual moderation decisions with readers.
We value thoughtful comments representing a range of views that make their point quickly and politely. We make an effort to protect discussions from repeated comments either by the same reader or different readers.
We follow the same standards for taste as the daily newspaper. A few things we won't tolerate: personal attacks, obscenity, vulgarity, profanity (including expletives and letters followed by dashes), commercial promotion, impersonations, incoherence, proselytizing and SHOUTING. Don't include URLs to Web sites.
We do not edit comments. They are either approved or deleted. We reserve the right to edit a comment that is quoted or excerpted in an article. In this case, we may fix spelling and punctuation.
We welcome strong opinions and criticism of our work, but we don't want comments to become bogged down with discussions of our policies and we will moderate accordingly.
We appreciate it when readers and people quoted in articles or blog posts point out errors of fact or emphasis and will investigate all assertions. But these suggestions should be sent via e-mail. To avoid distracting other readers, we won't publish comments that suggest a correction. Instead, corrections will be made in a blog post or in an article.
- Good jobs report gives Wall Street the jitters
- Wolf reverses Corbett, says deal between Highmark, UPMC doesn’t limit continuity of care to very ill
- Unemployment rate continues to drop as U.S. adds 295K jobs
- Alcoa may close or sell some aluminum plants to cut costs
- U.S. economic growth revised downward to 2.2%
- Profit increases 12% at Dick’s Sporting Goods
- McDonald’s to ban chicken suppliers from antibiotics used in human medicine
- AbbVie to buy leukemia drugmaker Pharmacyclics for $21 billion
- Big banks’ levels of capital strong, Federal Reserve finds
- Race toward bigger phones eases
- Americans see improved job market but a vulnerable economy, Pew poll finds