Closing Bell: Stocks Slip After Fed Says Economy Still Needs Support

Wall Street Federal Reserve (The decision of the Federal Reserve appears on a television screen on the floor of the New York Sto
Richard Drew/AP
By KEN SWEET

NEW YORK -- The stock market retreated from all-time highs Wednesday after the Federal Reserve said the U.S. economy still needed help from its stimulus program.

In its latest policy statement, the nation's central bank said it will continue buying $85 billion in bonds every month and keep its benchmark short-term interest rate near zero. The bond purchases are designed to keep borrowing costs low to encourage hiring and investment. The Fed said it would "await more evidence" that the economy was improving before starting to pull back its stimulus program.

The Fed's announcement was mostly expected by investors. Since the Fed's last meeting in September, the economy suffered a blow because of the 16-day partial shutdown of the U.S. government and the near-breach of the nation's borrowing limit.

As a result, investors thought it would be highly unlikely the Fed would make any changes to its stimulus program until was more evidence that the U.S. could grow without the central bank's help.

The soonest the Fed could revisit its bond-buying program will be at its mid-December meeting. However, Ben Bernanke's term as Fed chairman ends in February and his successor, Janet Yellen, has yet to be confirmed by the Senate. It is seen as unlikely Bernanke would take on such a large project like pulling back on the bond-buying program when he only has months left in the position.

"We're looking at March of next year at the earliest" before the Fed will start to pull back, said Dean Junkans, chief investment officer for Wells Fargo (WFC) Private Bank.

On Wednesday, the Dow Jones industrial average (^DJI) lost 61.59 points, or 0.4 percent, to 15,618.76. The Standard & Poor's 500 index (^GPSC) fell 8.64 points, or 0.5 percent, to 1,763.31.
The Dow and S&P 500 closed at record highs Tuesday. The Nasdaq composite (^IXIC) fell 21.72 points, or 0.6 percent, to 3,930.62.

Bond prices also fell after the Fed's announcement. The yield on the benchmark U.S. 10-year Treasury note rose to 2.54 percent from 2.50 percent the day before.

Stocks of home construction companies fell after the Fed said in its policy statement that "the recovery in the housing sector slowed somewhat in recent months." Last month, the Fed said housing "has been strengthening."

KB Home (KBH) fell 47 cents, or 3 percent, to $17.49. Luxury homebuilder Toll Brothers (TOL) fell 56 cents, or 2 percent, to $33.56 and PulteGroup (PHM) fell 21 cents, or 1 percent, to $18.00.
Despite the decline Wednesday, October has been a big month for the stock market. With just two days of trading left, the S&P 500 is up 4.9 percent, putting the index on track for its best month since July.

Investors also had another dose of quarterly earnings to work through.

General Motors (GM) rose $1.17, or 3 percent, to $37.23. After taking out one-time effects, the nation's largest automaker earned $1.7 billion, or 96 cents per share, beat analyst expectations of 94 cents a share.

Western Union (WU) plunged $2.39, or 12 percent, to $16.85. The money transfer company said late Wednesday that it may not see any profit growth in 2014 due to increasing regulation and compliance costs.

Facebook (FB) soared in after-hours trading after the company reported higher income than analysts were expecting. Facebook rose $5.87, or 12 percent, to $54.88. The social media network said it earned an adjusted profit of 25 cents a share for the third quarter, six cents better than what analysts were expecting. Revenue jumped 60 percent to $2.02 billion.

Hess (HES) and Aflac (AFL) also fell after reporting lower earnings.

What to Watch Thursday:
  • The Labor Department releases weekly jobless claims at 8:30 a.m. Eastern time.
  • Freddie Mac releases weekly mortgage rates at 10 a.m.
These major companies are due to report quarterly financial results:

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28 Comments

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betty_brock

Stop the artificial propping up and let the economy sink or swim on it's own. FIRE THE FED

October 30 2013 at 10:01 PM Report abuse rate up rate down Reply
1 reply to betty_brock's comment
Hello Bob

Betty, I reeeeeeeeeally don't think you want that to happen. You would very likely not be one of the survivors.

October 30 2013 at 10:05 PM Report abuse -2 rate up rate down Reply
propackage

I wonder how strong the economy will have to be to stop going deeper into debt?

October 30 2013 at 9:07 PM Report abuse +2 rate up rate down Reply
willypfistergash

So the obama economy can't stand on it's own?

October 30 2013 at 9:02 PM Report abuse -1 rate up rate down Reply
Christina

What happens when the Federal Reserve pulls out all of the fake, worthless, printed-on-the-fly money? I don't think they are making very smart decisions... this probably won't end well.

October 30 2013 at 8:40 PM Report abuse +1 rate up rate down Reply
2 replies to Christina's comment
propackage

Its the next presidents problem

October 30 2013 at 9:08 PM Report abuse +2 rate up rate down Reply
Hello Bob

Christina, with all due respect, I think the people running the show are far more intelligent and experienced in economic mechanics than you. Thanks for playing. You may want to try again.

October 30 2013 at 9:08 PM Report abuse -2 rate up rate down Reply
3 replies to Hello Bob's comment
positano1970

And I recently read that there are fears that the Federal Reserve Bank may need a bailout. Help us all ! !

October 30 2013 at 8:37 PM Report abuse +1 rate up rate down Reply
Michael

All time high ......who writes this stuff. In real 2007 dollars the new real high would be 21,000. I guess diluted dollars don't mean a thing to people who just want to believe everything is alright.

October 30 2013 at 8:13 PM Report abuse +1 rate up rate down Reply
glesh52262

It\'s been asked before, Where does the FED get the 85 billion each month?Just print it or what?

October 30 2013 at 7:40 PM Report abuse rate up rate down Reply
2 replies to glesh52262's comment
propackage

add it to the deficit, or the debt.

October 30 2013 at 9:09 PM Report abuse +2 rate up rate down Reply
.kowalski440mag

I\'ve been asking this on various threads for a few years now and most replies say they(Fed) are printing money to buy the T-notes. But the US money supply(all the US currency and coins in circulation in the world) has only increased about $300B since \'09. Yet intra-government borrowing has become the largest source of T-note buying. This means that the money supply should stand at over $4T, not $1.15T. Maybe the \'printed money\' is electronic cash.....only existing in an accounting algorithm. Or perhaps it\'s being stored away somewhere. I\'d like to know the answer so as to switch over to Canadian dollars before the stuff hits the fan.

October 31 2013 at 7:28 AM Report abuse rate up rate down Reply
mdelectrical2

Start the printers youre dollars will be worth nothing very soon!!!!!!!!!!

October 30 2013 at 6:30 PM Report abuse +1 rate up rate down Reply
jjdavas

I feel sorry for the next president, after the mess this president is making I don't think anyone will want to run. Oh I forgot, it's Bush's fault.

October 30 2013 at 6:08 PM Report abuse +2 rate up rate down Reply
jjdavas

This is a false economy, any time the government has to pump billions every month to prop it up things can't last. Wait until this bubble bursts.

October 30 2013 at 6:03 PM Report abuse +5 rate up rate down Reply
1 reply to jjdavas's comment
propackage

you keep talking like this and you not be popular at parties

October 30 2013 at 9:10 PM Report abuse +2 rate up rate down Reply