US stocks decline as FOMC maintains record stimulus
US stocks failed to rally after the Federal Open Market Committee said it would maintain the pace of record stimulus for at least another month.
In a decision that surprised no-one, Fed officials opted to continue stimulating the economy at a pace of $85 billion per month. Sluggish job growth, waning home sales and declining consumer confidence following the 16-day government shutdown gave the Fed its easiest decision since the spring, as the Committee “decided to await more evidence that progress will be sustained.” The central bank said it will probably keep its benchmark lending rate near zero so long as unemployment is higher than 6.5 percent. The official unemployment rate fell to 7.2 percent last month as labour force participation remained at 35-year lows.
Stocks on the American exchanges slumped, despite reassurance the equity markets will continue to be supported by record stimulus. The Standard & Poor’s 500 Index ended three consecutive days of new highs, falling half a percent to 1,763.31. The benchmark gauge is still on pace for its best year since 2003. The Dow Jones Industrial Average dropped more than 61 points to 15,618.80 after all but five of its 30 members declined. IBM (NYSE:IBM) , Verizon (NYSE:VZ) and Procter & Gamble (NYSE:PG) were the hardest hit, shedding at least 1.08 percent.
“While there were essentially no changes between this statement and previous ones, it is clear that even this wasn’t as dovish as some investors were expecting,” said Michael Mullaney of Boston-based Fiduciary Trust Company. Although record stimulus has kept equities well buoyed, some investors are concerned the domestic economy is slowing, which could impact the bottom line for US companies.
As we move past the midway point of the earnings season, more than three-quarters of the 312 S&P 500 companies to report earnings have beaten analysts’ projections. As a result, profits have grown by an average of 5 percent for those companies.
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