US stocks fall as Fed minutes show the central bank will likely taper bond purchases this year
Lucas Jackson/Reuters
- US stocks closed lower on Wednesday following the release of the Fed's July meeting minutes.
- The minutes revealed that the Fed is likely to begin tapering its monthly bond purchases soon.
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US stocks closed lower on Wednesday after the Fed's July meeting minutes revealed a general consensus that the central bank should begin tapering its monthly bond purchases by year-end.
The Fed began its bond buying purchase in response to the COVID-19 pandemic more than a year ago in an effort to stabilize credit markets to ensure the ability for a company to raise money via debt. But now, the economy and job growth has made enough progress and was the Fed's inflation goals are within reach, according to the minutes.
"Looking ahead, most participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year," the minutes said.
The Fed remained divided on when exactly the Fed should taper, how much the Fed should taper each month, and when the Fed should begin to raise interest rates.
Here's where US indexes stood at the 4:00 p.m. ET close on Wednesday:
- S&P 500: 4,400.27, down 1.07%
- Dow Jones Industrial Average: 34,960.69, down 1.08% (382.59 points)
- Nasdaq Composite: 14,525.91, down 0.89%
Investment analyst Sean Bandazian of Cornerstone Wealth said volatility will hit markets no matter how transparent the Fed is with its bond tapering program and eventual rate hikes.
"Both the Fed and market participants learned lessons from the Taper Tantrum. While we expect less of a surprise this time around there is still reason to believe we will see volatility throughout areas of the market with high sensitivity to interest rates," Bandazian said.
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Oil prices fell. West Texas Intermediate crude was down as much as 2.88%, to $64.67 per barrel. Brent crude, oil's international benchmark, dropped 1.97%, to $67.67 per barrel.
Gold fell as much as 0.02%, to $1,787.50 per ounce.
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