U.S. stocks eked out modest gains on Friday, but posted losses for the week, which was dominated by fears that the Federal Reserve may begin pulling back stimulus later this year. The S&P 500 index fell 2.1% to end the week at 1,592.43. The Dow Jones Industrial Average was down 1.8% for the week to closed at 14,799.40 with Hewlett-Packard Co. (-2.96%) was one of the top decliner. The Nasdaq Composite lost 1.9% for the week to settle at 3,357.25. The tech-heavy index was hurt by a 11.7% weekly drop in shares of Oracle Corp.. The tech bellwether delivered a disappointing quarterly earnings report late Thursday.
The Federal Open Market Committee left the monthly pace of
bond purchases unchanged at $85 billion, saying that “downside risks to
the outlook for the economy and the labor market” have diminished.
Policy makers raised their growth forecasts for next year to a range of
3% to 3.5% and reduced their outlook for unemployment to as low as 6.5%.
Accordoing to experts' opinion, the Fed has more confidence
in the momentum of the economy, there’s more distance between us and
the financial crisis, and now is the right time to just start thinking
about the normalization of policy. It’s trying to change market
psychology to be more reliant on the real economy and on the outlook for
company earnings.
Investors also were absorbing remarks from St. Louis
Federal Reserve President James Bullard, who explained on Friday why he
voted against the latest Fed policy decision.
Bullard said the decision by the Federal Reserve to lay out
its plans to taper bond buys was badly timed. The Fed should have
waited “for more tangible signs” of economic improvement and a halt in
the downward direction for inflation.
A Bloomberg survey following the FOMC shows the consensus
estimate is for the Fed to begin tapering in September by cutting back
by $20B/month to $65B/month. The survey shows the consensus is for bond
buying to halt completely in June 2014.
Shares of Facebook Inc. rose 2.0% after UBS analysts
upgraded the social-network company to a buy rating, citing new
monetization efforts and higher advertising revenue.
Large bank shares were hit hard as the Treasuries sell-off
continued, on fears of sharp writedowns linked to their bond holdings.
Citigroup dropped 4.8% for the week and Morgan Stanley lost 3.54%.
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