Stocks mount small rebound on Wall Street as volatility continues

Trading has been turbulent for yet another day, following the sharp declines of the previous two sessions.

Stocks on Wall Street are making a tentative recovery in the afternoon, with the Dow rising just 0.33%, while the S&P 500 climbed 0.39%. The NASDAQ was in negative territory, pulled down by Oracle after it reported mixed quarterly earnings post-market last night.

US stocks could be in for a rough patch, despite the improving economic conditions, as the market comes to terms with the Fed’s intention to start reducing stimulus at some point this year. The small bounce we’ve seen today shows that some investors sense a bargain after the bloodbath of the last couple of days.

The correction has been sparked because the Fed sees the economy on a firm footing going forwards, which is hardly terrible for corporate America. There remains a fair amount of uncertainty surrounding the Fed’s stimulus though, despite Ben Bernanke’s efforts to offer as much transparency as possible.

The timing of the reduction in the pace of the asset purchases will be dependent on data, as has been stated many times, and as St Louis Fed President James Bullard pointed out today, there are still signs of downward pressure on inflation that might conceivably defer tapering.

The dollar has continued its ascent today. The currency has been boosted by Mr Bernanke's positive assessment of the outlook for the US economy which has prompted market participants to begin pricing in interest rate rises for the end of 2014.

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