Stocks mixed as Fed officials speak

Movements have been slight despite indications that we can expect regular reductions in the size of the Fed’s bond purchases.

The Dow Jones has fluctuated in and out of the red throughout the day. At the time of writing, its latest oscillation was into positive territory, with the index rising 0.14% or 21 points to 15,467. The S&P 500 was still down on the day, but not by much, off by just 0.09% at 1753.6.

Basically such slight movements equate as moving sideways, with today’s economic data not suitably positive or negative enough to shift the market one way or the other. Part of the inertia will be investors taking a wait and see approach ahead of Friday’s hugely important payroll data.

Federal Reserve officials Charles Plosser and Dennis Lockhart, chiefs of the Philadelphia and Atlanta Feds respectively, delivered speeches today. Mr Plosser, speaking in Rochester,Alabama,  was the more hawkish of the two, saying that he would like QE wound down before the middle of the year, claiming the labour market is improving rapidly and inflation has stabilised.

‘The longer we continue purchases in such an environment, the more likely we will fall behind the curve in reducing the extraordinary degree of monetary policy accommodation,’ he said. Looking at December’s employment report and last week’s PCE data, I would contend that the latest data raises some real questions about the strength of the labour market and inflation remains stuck substantially below target.

The more centrist Mr Lockhart, in a speech on the economic outlook, said he expects stimulus to be brought to a halt by the end of this year, with $10 billion reductions being the ‘default mode’ and that the Fed will likely start to shrink its balance sheet ‘in some period of years’. He also described the stock market as being in correction mode.

Dow component Walt Disney Co reports after the market close tonight.

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