Stocks pause after wild Wednesday rally
Stocks in the US got off to a positive note on Thursday on the heels of the decision on Wednesday by the Federal Reserve to leave their bond purchase program intact and surprising investors by refusing to taper. Many investors were caught wrong footed which lead to a substantial rally in US stocks. Stocks settled mixed with the Nasdaq notching up gains and the S&P 500 along with the Dow Industrials closing lower.
Markets had already priced in a tapering which caused riskier assets to surge in price. To the open market committee the current economic landscape is not strong enough to warrant a tapering of the current bond purchase program.
In economic news on Thursday, Initial claims 15,000 to a 309,000, according to the Labor Department. This compares to an increase to 342,000 which was expected by economists. Last week the number was calculated incorrectly as two states, California and Nevada were unable to post claims information. At 314,750, the four-week average was about 5 percent lower than it was during the employment report’s survey week in August, when employers added a lackluster 169,000 jobs to payrolls.
Additionally, the US current account trade deficit narrowed in the second quarter to the lowest level in nearly three years. The Commerce Department reported that the current account deficit fell to $98.9 billion in the second quarter, a drop of 5.7 percent from the first quarter deficit of $104.9 billion.
Also, Existing Home Sales climbed to its highest levels since 2007. Existing-home sales rose 1.7% in August to a rate of 5.48 million, according to the National Association of Realtors. The pace was 13.2% higher than the same period last year.
In corporate news, regulators in the U.S. and U.K. are expected to fine J.P. Morgan Chase (NYSE:JPM) more than $900 million for actions tied to its 2012 “London Whale” trading debacle. The CFTC is investigating whether the bank’s London traders manipulated the market through its heavy trading in derivatives last year. The FBI and Manhattan prosecutors are also gathering evidence for what could result in criminal charges against J.P. Morgan over the London whale trades.
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