New York Report: Dow and S&P drop over Fed uncertainty

THE DOW and the S&P 500 declined yesterday after rising bond yields increased debate over how soon the Federal Reserve would start trimming its stimulus programme.

Fed officials offered diverging views and added to the uncertainty about the outlook for the Fed’s easy-money policies. Among them, Dallas Fed president Richard Fisher told CNBC that the Fed’s programme of buying $85bn in bonds every month to stimulate the economy cannot continue forever.

The day’s decline, which followed two days of gains and record high closes on the Dow, were led by financials, energy and utilities sectors. A 2.2 per cent drop in US oil futures hurt energy names like Chevron, which slid 0.9 per cent to $120.

Driving the market “have been worries over the timing of the taper,” said Quincy Krosby, market strategist with Prudential Financial.

She said investors are watching 10-year US Treasury note yields, which have moved higher as speculation increases that the Fed could move sooner rather than later.

“You have various Federal Reserve officials speaking, and the message seems to be the discussion of the taper has begun.”

During the session, bond yields hit their highest level since mid-September, though that level is still lower than a month ago.

The Dow Jones industrial average slipped 32.43 points, or 0.21 per cent, to end at 15,750.67. The S&P 500 Index dropped 4.20 points, or 0.24 per cent, to finish at 1,767.69. The Nasdaq Composite Index eked out a tiny gain of just 0.13 of a point to close at 3,919.92.