Renewed Fed Worries Lead To Weakness On Wall Street - U.S. Commentary

(RTTNews) - After seeing moderate strength for much of the session, stocks pulled back rather sharply in afternoon trading on Wednesday. Renewed concerns about the outlook for the Federal Reserve's stimulus program weighed on the markets.

The major averages regained some ground going into the close but still ended the day in the red. The Dow fell 66.21 points or 0.4 percent to 15,900.82, the Nasdaq dipped 10.28 points or 0.3 percent to 3,921.27 and the S&P 500 slid 6.50 points or 0.4 percent to 1,781.37.

The selling pressure that emerged in afternoon trading came on the heels of the release of the minutes of the Fed's October monetary policy meeting, which noted that the central bank could decide to slow the pace of its asset purchases at one of its next few meetings.

The minutes said the Fed members generally expect incoming economic data to be consistent with their outlook and thus warrant trimming the pace of purchases in coming months.

Peter Boockvar, chief market analyst at the Lindsey Group, said, "In other words, the dependency on the data will be key as it's been and if the data comes in as they forecast, a change in policy will begin."

"That said, the Fed's record of forecasting has left a lot to be desired so we must take a wait and see ourselves with the incoming economic numbers," he added.

Some meeting participants argued that it could even be appropriate to begin to winding down the program before an unambiguous further improvement in the outlook was apparent.

The minutes said a couple of Fed members also suggested that officials should start laying the groundwork for tapering in public statements and speeches.

Earlier in the day, some buying interest was generated by the release of a report from the Commerce Department showing stronger than expected retail sales growth in the month of October.

The Commerce Department said retail sales rose by 0.4 percent in October, while economists had expected sales to inch up by 0.1 percent.

A separate report from the Labor Department showing tame consumer price inflation in October also generated some positive sentiment.

Meanwhile, the National Association of Realtors also released a report showing a notable drop in existing home sales in October.

Sector News

Gold stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Gold Bugs Index down by 3.3 percent. With the drop, the index fell to its lowest closing level in over a month.

A notable decrease by the price of gold weighed on the sector, with gold for December delivery sliding $15.50 to $1,258 an ounce before seeing further downside in electronic trading.

Considerable weakness also emerged among utilities stocks, as reflected by the 1.4 percent loss posted by the Dow Jones Utilities Average. Within the sector, FirstEnergy (FE) tumbled 2.9 percent to a ten-year closing low.

Tobacco, commercial real estate, and telecom stocks also came under pressure, while strength remained visible among biotechnology stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index dipped by 0.3 percent, while Australia's All Ordinaries Index ended the day down by 0.8 percent.

Meanwhile, the major European markets ended the day mixed. While the German DAX Index inched up by 0.1 percent, the U.K.'s FTSE 100 Index fell by 0.3 percent and the French CAC 40 Index edged down by 0.1 percent.

In the bond market, treasuries came under considerable pressure amid the renewed concerns about the Fed's stimulus program. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 8 basis points to a two-month closing high of 2.792 percent.

Looking Ahead

While trading on Thursday may continue to be impacted by worries about the Fed, reports on weekly jobless claims, producer prices, and Philadelphia-area manufacturing activity are also likely to attract some attention.

On the earnings front, Abercrombie & Fitch (ANF), Dollar Tree (DLTR), Gamestop (GME), and Target (TGT) are among the companies due to report their quarterly results before the start of trading on Thursday.