US stocks declined the most on weekly basis since August, pulling the Standard & Poor’s 500 Index down from a record high, as investors weighed prospects for Fed tapering amid improving US economic data.
The S&P 500 fell 1.6% to 1,775.32 for the week after closing at an all-time high of 1,808.37 on December 9th. at 4 p.m. in New York. The index gained more than 24% so far this year and is poised for its best yearly gain in a decade. The Dow Jones Industrial Average tumbled 264.84 points, or 1.7 percent, to 15,755.36. Both indexes registered the biggest weekly decline since August. The Dow Jones Industrial Average climbed 15.93 points to 15755.36 on Friday but finished the week down 1.7%, registering its second consecutive weekly decline. The Dow has been up 20% so far this year.
“There are jitters around Fed tapering and that’s causing people to take some money off the table,” said Joseph Quinlan, the chief market strategist at U.S. Trust, a wealth management unit of Bank of America Corp., cited by Bloomberg. Quinlan, whose company oversees $333 billion in client assets added that “It’s been a very good year.”
A recent series of upbeat economic data from the US reinforced speculations the Federal Reserve might begin scaling back its monthly bond purchases at FOMC’s meeting next week.
Data showed that retail sales increased more than forecast last month and unemployment hit the lowest level in 5 years in October.
On December 12th, the House of Representatives passed a budget that limits automatic spending cuts. This will prevent another government shutdown. The agreement favored the Republicans suggestions for corporate tax breaks and protected the Democrats entitlement programs. The legislation should be approved by the Senate and then should be signed by the President Barack Obama.
The positive data, combined with the budget agreement may prompt the Federal Reserve to begin scaling back its monthly bond purchases at FOMC’s meeting next week.
The FOMC’s October meeting minutes pointed that Federal Reserve officials may reduce their $85 billion in monthly bond purchases “in coming months” as the economy improves. Central bankers are set to reconvene on December 17-18th.
The Federal Reserve may begin to scale back its $85 billion in monthly asset purchases at the committee’s policy meeting on December 17th-18th rather than wait until January or March, according to 34% of economists who participated in a Bloomberg survey on December 6th. In November’s survey, 17% of respondents projected a tapering in December.
In corporate news, McDonald’s (MCD) fell 2.4% to $94.44. The world’s largest restaurant chain said global sales at stores open at least 13 months adavnced 0.5% last month, trailing analysts’ estimates. Analysts projected a 0.6% increase, the average of estimates from Consensus Metrix.
Cisco lost 4.9% to $20.24, registering the biggest decline in the Dow. The biggest maker of computer-networking equipment revised downward its revenue forecast for the next three to five years on weakining demand from emerging markets and telecommunications-service providers.