Stocks Drop With Treasuries, Gold as Fed Discusses Taper

According to Bloomberg,

The Standard & Poor’s 500 Index capped its first three-day slump since September and Treasuries slid as the Federal Reserve indicated it may reduce monetary stimulus in coming months as the U.S. economy improves. Gold and silver extended losses while the dollar strengthened.

Gold Bars

Gold Bars

The S&P 500 fell 0.4 percent to 1,781.37 by 4:32 p.m. in New York after earlier climbing as much as 0.4 percent. Ten-year Treasury note yields increased nine basis points to 2.80 percent. Silver and gold dropped more than 2 percent and oil erased earlier gains. The Bloomberg U.S. Dollar Index, a gauge of the currency against 10 major peers, rose 0.4 percent. The euro slid against most peers with the European Central Bank said to weigh a negative deposit rate to ward off deflation.

Fed policy makers expected economic data to signal ongoing improvement in the labor market and “thus warrant trimming the pace of purchases in coming months,” according to minutes of the Federal Open Market Committee’s Oct. 29-30 meeting released today. Stocks pared gains earlier as Fed Bank of St. Louis President James Bullard said a reduction in bond purchases is “on the table” for the next policy meeting in December.

“The market’s trying to decide what it means,” Quincy Krosby, a market strategist for Newark, New Jersey-based Prudential Financial Inc., which oversees more than $1 trillion, said by phone. “It puts the market on guard for what does the data over the next two months hold.”

As of yesterday, four of five investors expected the Fed to delay a decision on the first cuts to bond buying until March 2014 or later, with 5 percent looking for a move next month, according to the latest Bloomberg Global Poll. Only one in 20 said the central bank will begin to reduce its purchases at its Dec. 17-18 meeting, according to the poll yesterday of investors, traders and analysts who are Bloomberg subscribers.

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