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Dow falls for a second day as the Fed discusses reducing stimulus this year

Dow falls for a second day as the Fed discusses reducing stimulus this year

18 Aug 2021

Major U.S. stock indexes slipped slightly on Wednesday as investors digested the Federal Reserve’s latest meeting minutes and talks about reducing stimulus.

The Dow Jones Industrial Average shed roughly 75 points, or 0.2%, after it snapped a 5-day winning streak on Tuesday. The S&P 500 dipped 0.2%. The Nasdaq Composite traded 0.1% higher.

The Fed published its meeting minutes from its July gathering, revealing discussions about possibly dialing back its monthly bond buying program this year.

“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 minutes noted the economy had reached its goal on inflation and was “close to being satisfied” with the progress of job growth.

To be sure, the minutes also reflected some division within the Fed with some members preferring to wait until early 2022 to start tapering bond purchases.

Since that July meeting, there’s been growing support within the Fed to announce a tapering in September and begin it in October.

Elsewhere, housing starts fell 7% in July to a seasonally adjusted annual rate of 1.534 million units, well below economists’ expectations.

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Investors also waded through more earnings reports from major retailers Tuesday.

Shares of Lowe’s popped after the home improvement company’s earnings last quarter topped expectations, with higher sales to home professionals.

Target shares pulled back despite the retailer beating on second-quarter earnings. The company’s profit and revenue topped expectations and the company raised its forecast for the second half of the year, citing a good start to back-to-school spending.

“The stock market is way overdue for a correction. Covid cases continue to spike higher darkening economic reopenings, consumer data shockingly has collapsed recently. …Several stocks have stopped reacting positively to good earnings, inflation reports remain hot, and Federal Reserve taper talk is everywhere,” Jim Paulsen, chief investment strategist at the Leuthold Group, said.