STOCKS fell yesterday, with the downturn accelerating late in the day after a Federal Reserve official said the central bank could begin easing up on its monetary stimulus this summer.
The three major US stock indexes had earlier traded in a tight range, supported by a gain of more than 12 per cent in Cisco Systems shares and as investors took in a batch of economic data that pointed to slower growth.
But the S&P 500 finished near its session low following the comments from John Williams, the president of the Federal Reserve Bank of San Francisco, who also said the Fed could end its bond purchases later this year, assuming the labor market continues to grow stronger. Williams is not a voter on the Fed’s policy-setting panel this year.
“When a Fed governor is out there and mentions this possibility, it does spook the market a little because I don’t think anybody quite knows how the stock market is going to react once (the stimulus) is taken away,” said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.
The Fed’s purchases of $85bn a month in bonds has been a significant driver of the rally in equities that has taken indexes to record highs and pushed the S&P 500 up nearly 16 per cent this year.
Analysts also said the comments could have been viewed as a reason to take a pause after such a strong run-up in stocks.
“It turned a boring day into a bit of profit taking,” Ghriskey said.
The Dow Jones industrial average dropped 42.47 points, or 0.28 per cent, to 15,233.22 at the close. The Standard & Poor’s 500 Index fell 8.31 points, or 0.50 per cent, to end at 1,650.47. The Nasdaq Composite Index slipped 6.37 points, or 0.18 per cent, to finish at 3,465.24.
New York Report