Did Talk of Taper Lite Send Stocks Tumbling?
Stocks made a slight retreat on Thursday on speculation that the Fed will taper its bond-buying, although by a less-significant $10 billion.
The major stock indices bounced around on Thursday, as the recent phase of bullishness was tempered by speculation that the U.S. Federal Reserve will proceed to taper its bond-buying by $10 billion, rather than $15 billion, as previously expected. The dreaded taper — once it goes into effect — is expected to send stocks lower. In fact, mere speculation on the subject by commentators sent the S&P 500 falling 3.1 percent during August.
Since PIMCO’s Bill Gross first mentioned the possibility of what he called a “Taper Lite”, the theme has been adopted by many commentators who expect the FOMC to vote in favor of a cutback at its September 17-18 monetary policy meeting. The Fed has been purchasing $40 billion in mortgage-backed securities and $45 billion in Treasury securities (bonds, bills, notes, coupons, etc.) every month during the third phase of quantitative easing.
The Dow Jones Industrial Average (NYSEARCA:DIA) lost 25 points to finish Thursday’s trading session at 15,300 for a 0.17-percent decline. The S&P 500 (NYSEARCA:SPY) fell 0.34 percent to close at 1,683. The Nasdaq 100 (NASDAQ:QQQ) declined 0.14 percent to finish at 3,175. The Russell 2000 (NYSEARCA:IWM) dropped 0.65 percent to end the day at 1,048.
In other major markets, oil (NYSEARCA:USO) climbed by exactly one percent to close at $38.87. On London’s ICE Futures Europe Exchange, November futures for Brent crude oil rose $1.54 (1.40 percent) to $111.73/bbl. (NYSEARCA:BNO). December gold futures sank $40.90 (3.00 percent) to $1,322.90 per ounce (NYSEARCA:GLD). Transports backed over the neighbor’s cat on Thursday, as the Dow Jones Transportation Average (NYSEARCA:IYT) fell 1.16 percent.