Modest fall in US stock index levels

A quiet day on Wall Street has seen shares easing off amidst a lack of catalysts to push prices higher.

Even though economic conditions remain quite benign for the stock market, share valuations have risen to the point that investors are beginning to adopt a wait and see attitude ahead of some key events for the financial markets.

Prime among those is next week’s FOMC meeting.

Expectations have been in flux regarding when the committee will finally initiate its long-promised taper, with conjecture that this might happen in the December meeting beginning to gain traction in the last few days, bolstered by the strength of Friday’s employment data and comments from Fed centrists, such as James Bullard, conveying a pliability in this area.

The introduction of a taper is not the be all and end all of the issue though: a token taper in December followed by months of constancy would likely be more supportive of stock prices than no taper in December with a determined schedule of reduction introduced in January. Quite how the Fed might communicate its future intentions is a thorny subject. A commitment to a set schedule might not offer the required flexibility to counter obstacles in the road, for example if inflation fails to return to target.

With under half an hour to the close in New York, the Dow Jones was down 0.25% at 15,984 and the S&P 500 was off by the same proportion at 1803.6.

The Volcker Rule was approved today by a unanimous vote by US regulating bodies. It will restrict banks using their own funds to trade for profit, although banks will have until the summer of 2015 to comply completely with the new regulations.

‘The Volcker Rule will make it illegal for firms to use government-insured money to make speculative bets that threaten the entire financial system, and demand a new era of accountability from CEOs who must sign off on their firm's practices,’ said President Obama in a statement. The reaction on Wall Street was muted to the news of the new rule being approved.

Tomorrow we have the monthly budget report from the Treasury and quarterly earnings from Costco.

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