The S&P 500 was lower by 1.39% and the Dow was off by 1.35%. Stocks were modestly lower in very quite trading prior to today’s FOMC meeting and commentary afterwards by Fed Chairman Ben Bernanke.
The take away today, and who knows if this will be reversed tomorrow, is that overall the Fed has become more hawkish than expected. The Fed Chairman implied that they would begin tapering later in the year assuming growth stays at the present pace and would have purchases ended by mid-2014. Again, that is the way it was interpreted today. Chairman Bernanke did make it crystal clear that any moves from the Fed are data dependent.
He stated clearly that policy overall would stay extremely accommodative for years. Also, for the first time the Fed said they would not be selling any mortgage backed securities. The consensus was the policies would be in place until the end of next year. Today’s action needs to be put into perspective. The S&P 500 is still up slightly for the week after today’s sell off.
The market is just 3.5% off its high. Selling today was not very aggressive. So, the market action can now only be called a consolidation of the recent gains. Interest rate sensitive stocks sold off the most today. Bond yields rose decisively in response to the Fed announcement. REIT’s, homebuilders, telecom, and utilities were the weakest performers on the day. Banks were a leading area because their net interest margins actually improve in a rising interest rate environment. Software stocks were an area of strength after Adobe reported better than expected earnings.
Commodities were mixed today. Copper, crude, grains, and natural gas traded ahead of the tape and precious metals traded lower.
Source: PFS Group
