Week-long decline for US stocks continues
The benchmark gauges were unable to end their week-long losing streaks Wednesday, as speculation over the pace and timing of Fed cuts continued to weigh on investors. The Standard and Poor’s 500 registered its first three-day decline since June 12, falling almost 0.4 percent to 1,690.91. The Dow Jones Industrial Average followed suit, declining more than 0.3 percent to 15,470.70. The previously resilient NASDAQ Composite registered similar declines, falling more than 0.3 percent to 3,654.01.
Stocks have been on the downswing since last Friday’s official payrolls report showed the US economy added fewer workers than expected in July. Despite weaker than anticipated job figures, economic data has come in better than expected in recent weeks, capped off by a robust GDP report that showed the US economy expanded at an annualized rate of 1.7 percent in the second quarter. On Thursday the US Department of Labor will release data on jobless claims for the week ended August 3. Speculation about a September Fed taper will heighten if jobless claims are lower than the forecasted 336,000.
Talks of bond tapering have resurfaced this week following comments from regional Federal Reserve Bank presidents. The latest regional president to signal the likelihood of bond tapering was Sandra Pianalto, who heads the Fed’s Cleveland Bank. Pianalto remarked on Wednesday the economy had experienced “meaningful improvement,” which may warrant a shift in monetary policy in the near-term.
In addition to reacting to Fed comments, the markets are in all likelihood experiencing a period of consolidation following a better-than-expected earnings season. Of the 432 companies in the S&P 500 that reported second quarter results, 72 percent have beat analysts’ profit expectations, and more than half have exceeded sales projections.
Year-to-date, the S&P 500 has advanced more than 16 percent, and is trading at more than 15 times estimated earnings.
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