Stocks end positive week on a sour note

Share prices were deep in the red late on Friday, but the major US benchmarks are still on track to finish higher for the week.

In the last hour of trading on Wall Street for the week the Dow was down over 100 points at 15,514, leaving the index close to where it was before the Fed-driven spike on Wednesday evening. The S&P 500 also declined sharply, falling 0.56% to 1712.6 and the NASDAQ 100 lost 0.23%.

The fall in the Dow comes on the last day for the index with its current line-up of stocks. From Monday there will be three new components: Goldman Sachs, Nike and Visa will all be joining the DJIA, while Alcoa, Bank of America and Hewlett-Packard make way for the newcomers.

Today’s falls appear to have been sparked by comments from FOMC voting member James Bullard who said the Fed’s decision had been a close thing and that October was a possibility for a small taper. The fact remains though, that the decision, like the one in September, will be data dependent.

Nothing is a foregone conclusion, therefore, and with inflation still below target I would say there are still question marks over whether the FOMC will be keen to taper immediately or instead err on the side of caution.

The economic calendar is fairly packed next week, so we will get a good chance to try and gauge if those signs of sustainable progress that the Fed desires are starting to appear. We have ‘flash’ PMI manufacturing on Monday, durable goods orders in the middle of the week, GDP on Thursday and the PCE price index on Friday, which is the Fed’s inflation measure of choice.

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