Indices extend losses as Fed Tapers Once Again
U.S. stocks fell on Wednesday, 29 January 2013 extending losses after the Fed announced it will reduce monthly bond purchases by another $10 billion and failed to mention the recent emerging markets turmoil that has knocked U.S. stocks off their highs. Equities ended broadly lower with small caps leading the weakness.
The Dow Jones Industrial Average fell 189.77 points, or 1.2% to 15,738.79, recording its fifth triple-digit loss this month. The Nasdaq Composite lost 46.53 points, or 1.1%, to close at 4,051.43. The S&P 500 closed 18.30 points, or 1%, lower at 1,774.20.
Meanwhile, stocks hovered near their opening levels in the morning, but fell to fresh lows after the Federal Open Market Committee released its latest policy statement, which called for another $10 billion reduction to monthly asset purchases. Strikingly, just like losses observed earlier in the day, the post-FOMC retreat was accompanied by more yen strength.
Wednesday afternoon's U.S. Federal Reserve's Open Market Committee (FOMC) statement on its monetary policy showed the Fed did another $10 billion per month tapering of its quantitative easing, now at $65 billion in month in bond-buying. That was the general belief in the market place, albeit not a clear consensus. The FOMC statement also reiterated that U.S. interest rates will remain extremely low.
The major news of the day came from Turkey, as its central bank raised its key lending rate sharply, up to 12%, to try to stave off the deflating Turkish lira. The move by Turkey's central bank acted to calm the market place for just a few hours, as the U.S. stock market fell under pressure by mid-morning U.S. trading. India's central bank also raised its interest rates this earlier week. The South African central bank raised its interest rates on Wednesday, following Turkey's move.
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Among major stocks under focus, Boeing reported better-than-expected fourth-quarter earnings, as profits rose from the same period a year ago. However, the company's outlook for 2014 was below expectations. Shares slid 5.3%. Dow Chemical shares jumped 3.9% after the company posted earnings that beat estimates and said it sees positive global economic growth in 2014.
Shares of Yahoo fell 8.7% after its results disappointed late Tuesday, prompting concerns that Chief Executive Officer Marissa Mayer still doesn't have a grip on turning around the Internet services company. Shares of AT&T fell 1.2% in the wake of late-Tuesday earnings.
Bullion prices ended higehr on Wednesday, 29 January 2014. Gold futures settled higher on Wednesday as fears of an emerging-market crisis and a sharp decline for equities on Wall Street buoyed the metal's investment appeal. But prices in electronic trading were volatile, moving below and then above the Comex closing level following the Federal Reserve's decision to cut its bond-buying program on Feb. 1 by another $10 billion a month to $65 billion. The move had been widely expected.
Before the Fed news, gold for February delivery rose $11.40, or 0.9%, to settle at $1,262.20 an ounce on the Comex division of the New York Mercantile Exchange. April gold, which is also among the most-active contracts, settled at $1,262.20 an ounce, up $11.70, or 0.9%.
Silver, saw its March contract add 5 cents, or 0.3%, to $19.55 an ounce.
Crude Oil futures spent Wednesday's session trading lower, on 29 January 2014 but by the close recovered most of what they had lost. Prices initially lost more ground after weekly supply data, then cut their losses to trade above $97.
March crude oil fell 5 cents, or 0.1%, to settle at $97.36 a barrel on the New York Mercantile Exchange.
The EIA said crude supplies jumped 6.4 million barrels for the week ended 24 January 2014. That was around triple what was expected, as market was looking for a climb of 2.1 million barrels. Gasoline supplies unexpectedly fell by 800,000 barrels, while distillate stockpiles dropped by 4.6 million barrels. Gasoline stockpiles were expected to climb 1.6 million barrels while distillate supplies, which include heating oil, were seen down 2.3 million barrels.
Treasuries ended on their highs with the 10-yr yield down seven basis points at 2.69%.
Tomorrow, weekly initial claims and the advance fourth quarter GDP report will be released at 8:30 ET while the December Pending Home Sales report will cross the wires at 10:00 ET.
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