Stocks Close Firmly Negative After Late-Day Volatility - U.S. Commentary

(RTTNews) - Stocks saw considerable volatility on Wednesday following the release of the minutes of the latest Federal Reserve meeting before ending the day in the red. The lower close extended a recent downward trend by the markets, with the Dow and the S&P 500 hitting their lowest levels in well over a month.

The major averages pulled back sharply going into the close, finishing the session firmly in negative territory. The Dow tumbled 105.44 points or 0.7 percent to 14,897.55, the Nasdaq fell 13.80 points or 0.4 percent to 3,599.79 and the S&P 500 slid 9.55 points or 0.6 percent to 1,642.80.

The weakness seen at the close of trading on Wall Street came on the heels of the release of the minutes of the Federal Open Market Committee meeting held in late July.

The minutes said almost all meeting participants were broadly comfortable with the outlook for the Fed's asset purchase program that was presented in Fed Chairman Ben Bernanke's post-meeting press conference in June.

That outlook called for the FOMC to begin scaling back the pace of its purchases later this year if economic conditions improved broadly as expected, with the program set to be concluded around the middle of 2014.

The minutes seemed to confirm expectations that the Fed will begin tapering its asset purchase program at its next meeting in mid-September.

At the same time, a few committee members emphasized the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said. "While it's far from a certainty, the minutes from the FOMC meeting back in late July appear to support our view that the Fed will begin to slow its monthly asset purchases at the next meeting in mid-September."

"An unexpectedly weak set of August employment figures could delay the taper but, with initial jobless claims trending even lower, we don't anticipate a report that would be bad enough to do that," he added.

The minutes of the Fed meeting largely overshadowed a report from the National Association of Realtors showing that existing home sales jumped to a three-year high in the month of July.

NAR said existing home sales jumped 6.5 percent to a seasonally adjusted annual rate of 5.39 million in July from a downwardly revised 5.06 million in June. Economists had expected existing home sales to climb to an annual rate of 5.15 million.

Sector News

Despite the volatility shown by the broader markets, gold stocks saw considerable weakness throughout the trading session. The NYSE Arca Gold Bugs Index tumbled by 4.6 percent, more than offsetting yesterday's 3.6 percent gain.

The substantial weakness among gold stocks came amid a relatively modest decrease by the price of the precious metal, with gold for December delivery slipping $2.50 to $1,370.10 an ounce.

Steel stocks also saw significant weakness on the day, dragging the NYSE Arca Steel Index down by 2 percent. Mechel (MTL) and Commercial Metals (CMC) turned in two of the sector's worst performances.

Notable weakness was also visible among networking stocks, as reflected by the 1.3 percent loss posted by the NYSE Arca Networking Index. The loss pulled the index down to its lowest closing level in almost a month.

Utilities, pharmaceutical, and retail stocks also came under pressure, ending the day on the downside along with most of the other major sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region turned in a mixed performance during trading on Wednesday. Japan's Nikkei 225 Index inched up by 0.2 percent, while Hong Kong's Hang Seng Index fell by 0.7 percent.

Meanwhile, the major European markets all moved to the downside on the day. While the U.K.'s FTSE 100 Index dropped by 1 percent, the French CAC 40 Index and the German DAX Index edged down by 0.3 percent and 0.2 percent, respectively.

In the bond market, treasuries ended the day firmly in the red following the release of the Fed minutes. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 4.1 basis points to 2.855 percent.

Looking Ahead

Trading on Thursday may continue to be impacted by reaction to the Fed minutes, although traders are also likely to keep an eye on reports on weekly jobless claims and leading economic indicators.

On the earnings front, tech giant Hewlett-Packard (HPQ) is among the companies releasing their quarterly results after the close of today's trading.