Dow Jones Industrial Average snapped a four-day winning streak
The stock market ended the midweek session on a modestly lower note on Wednesday, 29 October 2014. The Dow Jones Industrial Average snapped a four-day winning streak on Thursday, after the Federal Reserve made official its plans to end the last round of its recession-era stimulus program. Most major stock benchmarks slipped lower, after an initial knee-jerk bout of panic, in the wake of the Fed's policy decision. Stocks did recover somewhat, but still ended Wednesday's trading session in the red.
The Dow industrials ended down 31.44 points, or 0.2%, at 16,974. The Nasdaq Composite Index, which was already under pressure from Internet stocks lost 15 points, or 0.3%, to 4,549.23. The S&P 500 closed 2.75 points, or 0.1%, lower at 1,982.30.
Seven out of ten sectors ended in the red led by materials, industrials and consumer discretionary sectors.
The benchmark index held a slim gain at the start, but spent the day in a slow retreat that featured a brief afternoon spike to lows after the Federal Open Market Committee released its latest policy statement. As expected, the statement called for the final $15 billion taper, thus putting a stop to scheduled purchases of Treasuries and mortgage-backed securities.
Although the Fed said it would keep fed funds rate at zero, investors appeared to be caught off guard by the Fed's upbeat view on the labor market and inflation. In its accompanying statement after its two-day meeting, the Fed explicitly said it could raise interest rates sooner than markets have forecast, if the economy grows faster than the bank projects. It was the first time the Fed made such explicit remarks about how quickly it could hike rates.
In overnight news, the German government auctioned a 10-year bund on Wednesday and it fetched a record low average yield of 0.87%. Demand was so-so but the record low yield suggests European investors are still bearish on the European Union's economic and financial conditions. Germany is the strongest EU economy and its government debt is considered the safest in the EU.
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In other news, the International Monetary Fund reported that several world central banks continued to stock up on gold bullion in September. Russia, Azerbaijan and Kazakhstan all raised their gold holdings. Russia led the way by adding 1.2 million ounces last month.
In the tech sector, Apple added 0.6% while social media names lagged after Facebook reported earnings. Shares of Facebook plunged 6.1% with above-consensus earnings being overshadowed by concerns about increased spending plans and slowing revenue growth. Peers Twitter, LinkedIn, and Yelp also lagged, falling between 2.8% and 4.1%.
Bullion prices slipped on Wednesday, 29 October 2014 at Comex ahead of what is expected to be the final goodbye to the Federal Reserve's bond-buying stimulus program. Gold prices traded solidly lower and hit a three-week low Wednesday afternoon, in the immediate aftermath of the latest FOMC statement that was deemed a bit hawkish on U.S. monetary policy. The U.S. dollar index also surged on the FOMC statement, which also worked to put downside price pressure on gold.
Gold for December delivery fell $4.50 to settle at $1,224.90 an ounce. December silver dropped 4 cents to $17.26 an ounce.
Crude-oil futures rose on Wednesday, 29 October 2014 at Nymex getting a boost from a supply report that showed an increase in inventories was slightly below Wall Street expectations. Upbeat signals from the Federal Reserve about the U.S. economy also lifted oil. Both Brent and New York-traded crude have been up for two straight sessions. Crude futures advanced further after the EIA report, although gains moderated by the end of session.
On the New York Mercantile Exchange, light, sweet crude futures for delivery in December rose 78 cents, or 1%, to settle at $82.20 a barrel.
On Wednesday, the Energy Information Administration said U.S. crude-oil inventories increased by 2.1 million barrels, in the week ending 24 October 2014. Market had forecast a larger increase of 2.8 million barrels. Supplies of gasoline declined by 1.2 million, and distillates supplies decreased by 5.3 million. That contrasted with expectations of a decline of 350,000 barrels for gasoline supplies, and a decline by 950,000 barrels for distillates supplies.
Economic data released this morning was limited to the weekly MBA Mortgage Index, which fell 6.6% to follow last week's 11.6% spike.
The Dollar Index gained 0.7% to end within a point of its October high (86.87).
Treasuries, meanwhile, ended mixed. The FOMC announcement sent the complex to lows, but the 30-yr bond surged to new highs ahead of the close to pressure its yield one basis point to 3.05%. For its part, the 10-yr note reclaimed its post-FOMC losses with the benchmark yield ending higher by two basis points at 2.32%. Also of note, the 2-yr note settled near its low with its yield higher by six basis points at 0.49%.
Tomorrow, weekly Initial Claims (consensus 284,000) and the advance reading of Q3 GDP (consensus 3.0%) will both be released at 8:30 ET.
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