|Concerns over fate of Federal Reserve stimulus weigh on Wall Street
The US stock market edged slightly lower as the Federal Reserve started a two-day policy meeting that may herald the beginning of the end for its economic stimulus.
Few expect that the Fed will announce that it plans to pare back, or ‘taper,' its huge bond-buying program after its meeting wraps up Wednesday. However, good news on the US economy this month, including a positive jobs report, and a budget deal in Washington appeared to have increased the likelihood of a change, AP reports.
Major stock indices fell, but just slightly. The Standard & Poor's 500 index eased 5 points, or 0.3 percent, to 1,781. The Dow Jones industrial average crept down 9 points, or 0.1 percent, to 15,875.26. The Nasdaq composite edged lower by 5 points, or 0.1 percent, to 4,023. 68.
Eight of the 10 industrial groups in the S&P 500 declined, led by phone companies. Materials stocks and technology companies edged higher.
A couple of big companies bucked the downward trend after pledging to hand more cash to stock holders.
Boeing gained US$1.16, or 1 percent, to US$135.88 after the plane maker increased its stock buyback program by US$10 billion and raised its dividend 52 percent. 3M climbed US$3.73, or 3 percent, to US$131.39 after raising its dividend by 35 percent. The company also forecast solid earnings next year.
Stocks have surged this year as the Fed kept buying US$85 billion in bonds every month.
The only setbacks for the market this year have come when investors were nervous that the Fed was about to cut back its stimulus.
The S&P 500 index dropped 1.5 percent in June when Fed Chairman Ben Bernanke outlined a potential exit for the Fed from its stimulus strategy. The index fell 3.1 percent in August when investors thought that the policy would change in September.
Instead of worrying about the market's immediate reaction to the Fed's announcement Wednesday, investors should focus on the positive backdrop for stocks, said Liz Ann Sonders, chief investment strategist at Charles Schwab.
The economy is improving, companies are investing more, and earnings are forecast to grow at a steady rate, ensuring there will be demand for stocks.
“Dips that we get are not going to be terribly severe,'' Sonders said.
In government bond trading, the yield on the 10-year Treasury note dropped to 2.84 percent, from 2.88 percent on Monday, as investors bought bonds on a day when the government said consumer prices remained flat. When prices rise, a trend known as inflation, the value of bonds falls.
In commodities trading, the price of gold fell US$14.30, or 1 percent, to US$1,230 an ounce. Oil dropped 26 US cents, or 0.3 percent, to US$97.22 a barrel.