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US stocks fall on Fed stimulus, government deficit

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US stocks fall on Fed stimulus, government deficit

The Standard and Poor’s 500 fell for its second straight session after hitting a record high earlier in the week, as investors weigh the latest comments made by Fed officials concerning the future of monetary policy.

Both sides of the quantitative easing debate made headlines Friday, as Kansas City Fed President Esther George and Fed Bank of St. Louis Fed President David Bullard chimed in on the central bank’s latest policy decision. George represented the lone vote against the Fed’s decision to withhold bond tapering. On Friday she expressed disappointment in the Fed’s “wait and see” approach, saying such a strategy “unnecessarily discounts the very real progress we see.”

On the other hand, the pro-QE Bullard told markets October could be the month the central bank reigns in asset purchases, but cautioned the decision would depend entirely on the economic data. Fed policymakers will have the opportunity to weigh several batches of economic reports before the October 29-30 meetings, including September nonfarm payrolls, revised August nonfarm payrolls, and housing sector growth.

Market participants were in risk-off mode for most of the day as the threat of a US government shutdown intensified. The Treasury will exhaust its ability to borrow funds in mid-October when debt reaches its statutory limit. The US House voted to raise the borrowing cap in an effort to fund President Barrack Obama’s healthcare law, leaving the door open to the Senate to consider its version of funding arrangements next week.

The S&P 500 was down almost three quarters of a percent to 1,709.91. The Dow Jones Industrial Average fell more than 185 points to 15,451.10, with 27 of its 30 members trading negatively. The NASDAQ Composite suffered a loss of 0.39 percent, falling to 3,774.73.

The focus will shift back to economics next week, when the US is scheduled to release several key performance measures ranging from manufacturing activity to durable goods orders.

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