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[video] Fed Kills Shopping Spree, Stocks Flip on Fed Minutes

Tickers in this article: DE JCP

NEW YORK ( TheStreet) -- Markets dropped on Wednesday after the Federal Reserve's policymaking minutes suggested the central bank will scale back its economic stimulus in the coming months.

The news offset earlier gains prompted by a strong retail sales report suggesting the government shutdown pressured consumers less than expected.

The Dow Jones Industrial Average  dropped 0.41% to 15,900.82 while the S&P 500 was off 0.36% to 1,781.37. The Nasdaq slid 0.26% to 3,921.27.

"Will it happen sooner rather than later? Yea, it will happen sooner," Ron Florance, deputy chief investment officer for investment strategy at Wells Fargo Private Bank, said in a phone interview, referring to the FOMC minutes. Florance said that the drop in markets likely was a reaction by investors to take profits off the table.

U.S. consumers appeared unaffected by the partial government shutdown during October, boosting U.S. retail sales by the most in four months. Retail sales rose 0.4% from a flat reading in September, the Commerce Department said on Wednesday. A sharp drop in gas prices was a slight dampener on the result. The Consumer Price Index contracted in October for the first time in six months, falling 0.1% from a prior reading of 0.2%. Economists were expecting no change.

The European Central Bank is reported to be considering a smaller-than-usual cut in the deposit rate if it is moved to negative territory for the first time, according to Bloomberg. The rate for commercial lenders who invest excess cash with the ECB would be negative 0.1 percent down from zero, according to reports.

U.S. businesses also increased their inventories by the largest amount in eight months during September, with a modest rise in sales. Inventories rose 0.6 percent in September while sales rose 0.2 percent, the Commerce Department said Wednesday. 

On the flip-side, October existing home sales fell 3.2% month-over-month to an annualized pace of 5.12 million units. This was worse than expectations for a 2.9% result and the second straight monthly decline. It compared to a 1.9% fall in September to 5.29 million units.

In company news,  J.C. Penney   posted a larger-than-expected quarterly loss Wednesday but said sales would likely continue to improve during the current quarter. The retailer lost $489 million or $1.94 per share in the third quarter while lower revenue of $2.78 billion was roughly in line with expectations. Analysts had expected a loss of $1.71 per share. Company shares jumped 8.4% to $9.44.

Deere , the manufacturer of farm equipment, posted fourth-quarter net income that was 17 percent higher after raising prices. The company earned $806.8 million or $2.11 per share up from $687.6 million or $1.75 per share a year earlier. Results beat estimates of $1.90 per share profit. Deere shares closed up 2.1% to $84.52 on Wednesday.