Stocks fell after the Federal Reserve minutes signaled that a formal decision on a reduction of the central bank’s massive bond-buying program could happen in 2021. Bonds and the dollar fluctuated.
“Various participants” said that economic and financial conditions would warrant a reduction of the $120 billion monthly pace “in coming months,” minutes of the Federal Open Market Committee’s July 27-28 gathering said. While “several others” viewed a reduction as “more likely to become appropriate early next year” because the labor market had not met their standard of substantial further progress. The officials also concluded that they had attained their inflation goal.
“There were plenty of reasons to believe the minutes wouldn’t be a massive market mover, and that’s exactly what we’ve seen so far,” wrote Matt Weller, global head of research for Forex.com and City Index. “The focus now shifts to next week’s Jackson Hole symposium, where traders will closely scrutinize Fed Chairman Powell’s keynote speech for any hints about the timing of a taper announcement.”
Earlier Wednesday, St. Louis Fed President James Bullard said he prefers tapering to be done by the first quarter of 2022, with the last three months of next year being a “logical place” for a rate liftoff. Several other Fed 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 want to see further progress before considering a move to taper.
Here are some events to watch this week:
- Bank Indonesia rate decision and Governor Perry Warjiyo briefing Thursday
- U.S. initial jobless claims, leading index Thursday
Some of the main moves in markets:
- The S&P 500 fell 0.3% as of 2:49 p.m. New York time
- The Nasdaq 100 fell 0.1%
- The Dow Jones Industrial Average fell 0.4%
- The MSCI World index was little changed
- The Bloomberg Dollar Spot Index was little changed
- The euro was little changed at $1.1713
- The British pound rose 0.2% to $1.3764
- The Japanese yen fell 0.3% to 109.89 per dollar
- 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%
- West Texas Intermediate crude fell 2.1% to $65.20 a barrel
- Gold futures were little changed
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