Cautious Investors Wait for FOMC Clues

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Investors remained risk-averse on Monday, with the Federal Reserve’s FOMC set to begin its monetary policy meeting on Tuesday.

After Friday’s global stock market rout, investors continued to head for the sidelines on Monday. After last week’s report from “The Fed Whisperer” (Jon Hilsenrath of The Wall Street Journal), which indicated that another $10 billion cutback from the Federal Reserve’s monthly bond purchases will result from the January FOMC monetary policy meeting on Tuesday and Wednesday, investors remained cautious.

If the FOMC does decide to trim another $10 billion from its monthly bond purchases on Wednesday, we could see another stock selloff. On the other hand, after what happened to global stock (and currency) markets on Friday, a good deal of commentary has been focused on the issue of whether the FOMC will (temporarily) reverse its initial $10 billion cutback. This would obviously send stocks soaring. There is also the possibility that the Fed will delay its next tapering move. Since a January taper appears to have been price-in to stocks, the Fed might as well “tear off the Band-Aid” at this point because if the FOMC procrastinates, we could go through the entire process again, next time. 

The Dow Jones Industrial Average (NYSEARCA:DIA) lost 41 points to finish Friday’s trading session at 15,837 for a 0.26 percent decline. The S&P 500 (NYSEARCA:SPY) fell 0.49 percent to close at 1,781. The Nasdaq 100 (NASDAQ:QQQ) dropped 0.99 percent to finish at 3,509. The Russell 2000 (NYSEARCA:IWM) sank 1.43 percent to end the day at 1,127.

In other major markets, oil (NYSEARCA:USO) fell 1.01 percent to close at $34.23. On London’s ICE Futures Europe Exchange, March futures for Brent crude oil fell 90 cents (0.84 percent) to $106.29/bbl. (NYSEARCA:BNO). February gold futures declined $7.90 (0.63 percent) to $1,255.50 per ounce (NYSEARCA:GLD). The transportation sector drove into a ditch on Monday, as the Dow Jones Transportation Average fell 0.82 percent (NYSEARCA:IYT).

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