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Claire Norman/MEDILL

The Federal Open Market Committee will meet Dec. 17-18, but "tapering" may not occur until March at the earliest.


Stocks decline for third straight session on Fed jitters, holiday sales disappointment

by Claire Norman
Dec 03, 2013


Stocks dipped for a third straight session as nervous investors worried about the future of Federal Reserve policy ahead of several key economic reports later this week, and following the weakest Black Friday retail sales in four years.

The Dow Jones Industrial Average dropped 94.15 points, or 0.6 percent, to close at 15,914.62. The S&P 500 Index fell 5.75 points, or 0.3 percent, to close at 1795.15 and the Nasdaq Composite Index slid 8.06 points, or 0.2 percent, to close at 4,037.20.

“The Fed is driving the market and it’s all the Fed,” said Bob Iaccino, chief market strategist at TopstepTrader in Chicago.

The Federal Open Market Committee, the Fed’s policymaking arm, will have its final meeting of the year on Dec. 17 and 18.  Despite market jitters about the continuation of the Fed’s $85 billion monthly bond purchases, Iaccino believes that the Fed will refrain from “tapering,” or reducing the purchases, until March at the earliest.

“The Fed is like an ocean liner,” said Iaccino. “They don’t want to taper and then undo it, they want to make a policy decision and stick to it.”

The benchmark 10-year Treasury yield fell to 2.78 percent after hitting its highest point in three weeks on Monday of 2.80 percent.

Investors were uncertain about consumer confidence and spending in light of the National Retail Federation’s tally of Thanksgiving weekend sales, which fell 2.7 percent to $57.4 billion, the lowest level since 2009.

“Black Friday did not turn out as well as some people wanted,” said David Nice, associate economist at Mesirow Financial. “Numbers were down from last year which may be discouraging for investors.”

Shares of Goodyear Tire & Rubber Co., General Motors Co. and Ford Motor Co. all suffered significant declines of nearly 3 percent Tuesday, despite better-than-expected November U.S. auto sales rate of 12.62 million units on an annualized basis, up 7.6 percent from the 11.73 million in October, according to Bloomberg data.

Abercrombie & Fitch Co. shares gained more than 7 percent after activist investor Engaged Capital urged the company’s board to replace CEO Mike Jeffries.

Coming up this week are several important economic indicators, including the release of the Fed’s Beige Book survey of economic conditions on Wednesday, revised third quarter GDP on Thursday, and Friday’s monthly employment report for November.

Economists expect third quarter GDP to be revised upward to 3.1 percent from the initial reading of 2.8 percent, according to Bloomberg, while November’s unemployment rate is expected to decline to 7.2 percent from 7.3 percent in October. Nonfarm payroll employment is forecast to rise by 181,000.

Mesirow’s Nice said the November jobs numbers may not be as important to market participants as the revisions to October’s nonfarm payrolls, which rose a much larger-than-expected 204,000. Many are waiting to see whether a downward revision will trim the outsized payroll number and ease concerns that a too-strong economy might cause the Fed to taper earlier than March.