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Release of FOMC minutes coincides with volatile U.S. stock movements

TradingPub Admin | July 10, 2013

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Global investors responded to the release of the minutes for the most recent Federal Open Market Committee meeting by creating volatility in U.S. stocks.

The S&P 500 Index, a benchmark group of stocks, increased and then declined by as much as 0.3 percent earlier in the session, before trading 0.1 percent higher at 1,651.10 at 3:34 p.m. in New York, according to Bloomberg.

During the prior four trading sessions, this group of U.S. equities gained 2.4 percent as markets responded to strong labor market data, the media outlet reports. In addition, the Dow Jones Industrial Average was down 0.1 percent at 15,287.85 in the afternoon.

Response to FOMC minutes
Markets responded to the statements contained in the minutes, which revealed a division between the voting members of the FOMC who wanted to hold off on tapering until the labor market improved substantially, and those who indicated a preference for starting the reductions in bond purchases more quickly, according to International Business Times.

This statement comes shortly after the U.S. Labor Department released the jobs report for June, which indicated that the nation's employers added a net of 195,000 positions during the period. In addition, the document indicated that the unemployment rate was unchanged during the month, remaining at 7.6 percent.

"The strength of June's employment report, which was released last week, will surely satisfy those members who are more reluctant to pull the trigger," Paul Dales of Capital Economists wrote in a note sent to clients, the media outlet reports. "The Fed will probably start to taper QE3 in September."

In addition to that particular government report exceeding the predictions of market experts, government data indicates that during the period containing April, May and June, the nation created an average of 196,000 positions every month.

QE speculation
The future of quantitative easing has drawn significant visibility in the recent past, at a time when various Federal Reserve officials, including chairman Ben Bernanke, have provided statements about what could happen to these stimulus measures in the future.

At the end of last month, Bernanke spoke with members of the meeting immediately following the end of the FOMC meeting, and stated at the time that there was a possibility that the central bank's bond purchases could be halted in 2014, after being reduced starting this year.

Markets provided an abrupt response the announcement made by the central bank chief, causing the S&P 500 Index to plunge 4.8 percent between June 19, which was the last day of the FOMC policy meeting, and June 24, according to Bloomberg. However, these losses were almost entirely recovered, as the benchmark group of stocks finished the trading session on July 9 less than 1 percent below its record high.

BEA report
Another factor that could potentially impact the decisions of the FOMC is the revised U.S. GDP figures for the second quarter, which will be released later in the month, Bank of America Merrill Lynch economist Michelle Meyer told International Business Times.

"We believe [the report] will reveal significant adjustments to GDP, personal income, the savings rate and corporate profits," he wrote, according to the news source. "If we are right, the revisions will reveal a healthier economy than previously believed, suggesting positive momentum and reduced downside risks."

The Bank of America Merrill Lynch economist stated that the Federal Reserve probably already knows that the figures will be adjusted higher, and that the central bank will welcome this data, and the fact that it helps support the perception of a strong economy.

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