Stocks Tumble After Fed Minutes Release
Stocks in the US started the trading session mixed as investors continue to weight for an impetus to drive the major averages above the current psychological levels of Dow 16,000 and S&P 500 1,800. Once these hurdles are complete, the major averages are likely to experience a solid performance during the balance of 2013. Stocks moved lower toward the end of the trading session after the Federal Reserve released the minutes from their latest meeting. Taper talk caught market participants attention which drove down the major indexes.
Chairman Ben Bernanke in a speech on Tuesday said that tapering depends on further improvement in jobs data. According to the Chairman, the Fed’s scaling back of its bond-buying program still depends on the jobs market improving further and a rise in inflation towards the central bank’s goal of 2. Bernanke also said that the Fed is likely to keep interest rates near zero until even after unemployment drops below 6.5%, the bank’s threshold for increasing rates, as policy makers want to be assured of the strength of the job market.
Economic data in the US was slightly better than expected. According to the Commerce Department, retail sales came in at 0.4% better than the 0.2% expected by economists. Excluding auto, retail sales printed at 0.2% while excluding autos and gasoline retails sales showed a 0.3% increase. On the inflation front, consumer inflation remains very tame. CPI came in down 0.1% in October month over month and up 0.1% for the core CPI rate which excludes food and energy. The year over year numbers for headline CPI are 1% while the core rate increased by 1.7% below the Fed’s target of 2%. Additionally, Housing Starts came in worse than expected declining 3.2% in October. The major indexes continue to hover near the 10-day moving average.
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