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Stocks decline on taper speculation, FOMC minutes

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Stocks decline on taper speculation, FOMC minutes

Stocks on the American exchanges tumbled after Federal Reserve officials kept the possibility of a bond taper on the table. The minutes of the October 29-30 FOMC policy meetings revealed the central bank could begin reducing record stimulus sooner than expected, depending on the status of economic recovery.

Since November 2008, the central bank has injected nearly $4 trillion into the US economy in an effort to promote borrowing and stimulate growth. The third round of easing—dubbed QE3—was initiated in September 2012.

The pace and timing of a Fed asset taper has stolen headlines since the spring, when Fed Chairman Ben Bernanke first hinted at the possibility. The FOMC has been coalescing around this topic for several months in order to determine an optimal exit strategy—one that wouldn’t jeopardize growth.

The minutes revealed Fed officials believe the economic data “would prove consistent with the Committee’s outlook for ongoing improvement in [labour] market conditions and would thus warrant trimming the pace of purchases in coming months.”

The Standard & Poor’s 500 declined more than 6 points to 1,781.36, after hitting an intraday high of 1,795.73. The Dow Jones Industrial Average declined more than 66 points to 15,900.80 after 21 of its 30 members registered losses. Caterpillar Inc (NYSE:CAT) , EI du Pont de Nemours & Co (NYSE:DD) and The Boeing Company (NYSE:BA) were the biggest losers, declining at least 1.14 percent.

The outlook on the shopping season received a boost after retail spending rose 0.4 percent in October, beating estimates. Retail sales excluding autos, gas and building materials rose 0.5 percent.

“The fact that we’re seeing strength in the core retail numbers further supports the thesis that the US consumer is doing better this year than perhaps throughout this entire recovery,” said Anastasia Amoroso of JPMorgan Funds. Retail spending is likely to continue progressing higher as we approach the holiday season. Holiday shopping represents 20 to 40 percent of annual retail revenues in the United States.

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