Fed Tapering Pushes Stocks Lower
The initial reaction to the Turkish Central Bank raising interest rates by more than 4% was a pop in riskier assets. Asian stocks rallied significantly with the Nikkei notching up a 2.7% rally. US stock futures rallied initially but by the time the US markets opened, stocks opened in the red. All eyes were on the Federal Reserve as they were scheduled to release their decision on interest rates at 1800 GMT. The FOMC moved forward with tapering their bond purchase program by 10 billion dollars per month to 65 billion, knocking stocks down pushing all three major averages into the red.
The Turkish central bank increased its overnight lending rate to 12% from 7.75% and the overnight borrowing rate to 8% from 3.5% in an attempt to defend the lira, which has been hit by domestic scandal and the prospect of Fed tapering.
The Federal Reserve is scheduled to complete its two day meeting and announce its decision on interest rates and quantitative easing at 1800 GMT. Most believe the Fed will continue to reduce its bond purchase program by 10 billion dollars’ worth of treasuries and agency bonds. This would bring the monthly total down to 65 billion per month. If the Fed decides not to taper, equity bourses will likely experience a pop.
As expected, President Obama said in his State of the Union address last night that he will use his executive power where he can to implement his economic and other policies in an attempt to narrow the gap between rich and poor. Obama announced a dozen such proposals, including raising the minimum wage to $10.10 an hour for future federal contract workers.
Yahoo (NASDAQ:YHOO) released earnings after the bell on Tuesday and it is clear that CEO Marissa Mayer has spent lots of money on acquisitions, but she’s still not managed to turn around the firm’s revenues. Q4 sales dropped 6% to $1.27 billion as ad prices fell again, although revenues were in line with consensus, while EPS of $0.46 topped forecasts and net profit rose to $348.2 million from $272.3 million a year earlier.
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