Stocks edge up on day of uncertainty

Late in the session, the S&P has nosed into positive territory.

It’s been a day in which an unexpectedly low jobs report has thrown a spanner into the works as far as the Fed’s tapering goes. Or has it?

Not necessarily, according to the St Louis Fed’s James Bullard, who told reporters after a speech in Indiana today that he was ‘disinclined’ to fixate solely on last month’s data, suggesting the Fed is likely to plough on with its tapering. He’s in a far better position to judge this than me of course, but I’m not sure I agree.

If the incoming data currently says the labour market is slack and inflation is well below target, it’s difficult to see how the Fed can rationalise further cuts in stimulus apart from the rather thin argument of they think things will get better. Strictly speaking such an argument would fit in with the wording of their policy statement, which said ‘asset purchases are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's outlook for the labour market and inflation,’ but choosing to ignore the latest data and instead letting the decision hinge on the committee's outlook would seem to be almost sophistry. Personally I think a taper is less likely in January than a no change decision.

Next week will give us a better picture in terms of the inflation side of the equation, when we have import and export prices, as well as consumer and producer price indices. Should inflation continue to show no signs of picking up it would bolster arguments for a no taper decision come the next FOMC meeting.

Stock prices have been in flux for most of the day, with no clear trend, but heading into the last half an hour on Wall Street the market was broadly in positive territory. While the Dow was down just 6 points, the wider-encompassing S&P 500 index was up 0.21% and the NASDAQ 100 gained 0.24%.

Quarterly earnings will get into full swing next swing, with a host of financial companies reporting. JP Morgan and Wells Fargo kick things off for the big-name banks on Tuesday.

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