Stocks Dinged as Fed Dims Hopes for QE3
NEW YORK ( TheStreet) -- U.S. stocks fell on Tuesday after the Federal Reserve downplayed the prospects for more quantitative easing.
The Dow Jones Industrial Average shed 65 points, or 0.5%, to close at 13,199. The blue-chip index was off by more than 130 points at its session low.
The dollar index, meanwhile, gained 0.7% to $79.37.
Investors had been expecting the minutes to show a stronger bias towards additional quantitative easing after recent speeches by various Fed officials, including Chairman Ben Bernanke, indicated that the loose money policy would continue.
The central bank's current bond-buying program, known as Operation Twist, which involves selling bonds nearing expiration and using the proceeds to buy longer-term ones, finishes in June.
Bernanke has sent mixed signals of late, acknowledging improvement in the economy, but maintaining that the employment picture is still problematic and arguing in favor of continued accommodative monetary policy.
Tuesday's minutes struck a measured tone about further easing with the committee saying it was "prepared to adjust the size and composition of its securities holdings as appropriate to promote a stronger economic recovery in a context of price stability."
There was also a change in the language describing the circumstances that might merit QE3. "A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below its mandate consistent rate of 2 percent over the medium run," the statement said.
That was a switch from the minutes of the Jan. 24-25 meeting when the FOMC said: "A few members observed that, in their judgment, current and prospective economic conditions--including elevated unemployment and inflation at or below the Committee's objective-- could warrant the initiation of additional securities purchases before long."
The bond market sold off following the release of the minutes with the 10-year Treasury note last down 30/32, raising the yield to 2.301%.
Breadth within the Dow was negative with 27 of the index's 30 components moving lower. Cisco(CSCO) , JPMorgan Chase (JPM) , Bank of America (BAC) and Hewlett Packard (HPQ) were among the biggest percentage decliners,
In other economic data, factory orders for February came in up 1.3%, just shy of the consensus estimate, according to Briefing.com, for an increase of 1.4%. January's decline was also revised to 1.1% from a previously reported 1%.
The auto industry is also reporting its vehicle sales for the month of March. Thirty-eight analysts surveyed by Thomson Reuters have forecast an annualized sales rate of 14.75 million vehicles, up from 13.1 million a year earlier.