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US stocks fall for a second consecutive day on Fed

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US stocks fall for a second consecutive day on Fed

Concern over the pace and timing of US Federal Reserve bond tapering dictated investment decisions Tuesday, as the benchmark gauges all declined on fears. The S&P 500 and Dow Jones Industrial Average suffered their second consecutive day of declines. The S&P ended the New York session further away from its Friday record high of 1,709.67, closing at 1,697.37 (a decline of almost 0.6 percent). The Dow Jones fell 0.6 percent, ending at 15,518.70. Despite its Monday rally, the NASDAQ Composite was the hardest hit on Tuesday, losing three quarters of a percent to close at 3,665.75.

Anxiety over US monetary policy intensified Tuesday after Federal Bank of Chicago President Charles Evans didn’t rule out the possibility of bond tapering in September. Unlike Dallas Fed President Fisher, who on Monday warned investors not to rely on government stimulus, Evans has been one of the strongest proponents of quantitative easing.

Evans’ remarks were also shared by Dennis Lockhart, President of the Atlanta Federal Reserve Bank, who said bond tapering could come at any time before the end of the year.

Stocks failed to rally after the US posted its narrowest trade deficit in almost four years. The US trade deficit for June was $-34.22 billion, beating expectations by more than $9 billion. Declining oil imports and higher exports from American companies are the main reasons behind the smaller trade deficit—a sign second quarter growth was stronger than initial expectations.

American retailers were among the biggest losers Tuesday. Shares of American Eagle Outfitters declined more than 12 percent to $17.55. Shares hit one-year lows on the news of weaker than expected second quarter profits, which were driven by weak sales and margins. The stock’s meteoric fall triggered steep declines for other similar retailers, including Urban Outfitters and Abercrombie & Fitch.

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