U.S. stocks dip as market preps for stimulus tapering; Dow falls 0.46%

U.S. stocks fell on Friday in a quiet session as investors sold on sentiments that monetary stimulus programs such as the Fed's USD85 billion bond-buying program are on their way out beginning in a couple of months.

At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.46%, the S&P 500 index fell 0.36%, while the Nasdaq Composite index fell 0.25%.

Investors sold or avoided stocks on market sentiments that Federal Reserve monetary stimulus programs that bolster stock prices by keeping borrowing costs low will begin to taper in September or December — either way in the near future.

Cleveland Fed President Sandra Pianalto said Wednesday there has been “meaningful improvement” in the labor market and that tapering may be warranted if it continues to strengthen.

Chicago Fed President Charles Evans and Dallas Fed President Richard Fisher have made similar comments.

Fed officials have said they will pay close attention to data before deciding on when to taper and eventually end stimulus programs, though investors took up positions on Friday that tapering will begin this year.

A decision to dismantle stimulus measures could send stocks falling even if temporarily due to the beginning of the end of Federal Reserve support. 

Leading Dow Jones Industrial Average performers included Alcoa, up 3.92%, Caterpillar, up 0.61%, and Pfizer, up 0.27%.

The Dow Jones Industrial Average's worst performers included Walt Disney, down 1.55%, AT&T, down 1.39%, and Home Depot, down 1.36%.

European indices, meanwhile, finished higher.

After the close of European trade, the EURO STOXX 50 rose 0.23%, France's CAC 40 rose 0.30%, while Germany's DAX 30 finished up 0.24%. Meanwhile, in the U.K. the FTSE 100 finished up 0.82%.

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Forex - Dollar makes cautious gains as market preps for Fed tapering

The dollar traded mixed to higher against most major currencies on Friday after investors digested comments from several Federal Reserve officials over the week and decided stimulus programs will begin to unwind this year.

Monetary stimulus programs such as monthly asset purchases push down long-term borrowing costs to spur recovery, weakening the greenback in the process, though talk of their dismantling can strengthen the greenback.

In U.S. trading on Friday, EUR/USD was down 0.28% at 1.3342.

France reported earlier that the country's industrial production dropped 1.4% in June, disappointing expectations for a 0.1% rise. May's figure was revised to a 0.3% contraction from a previously estimated 0.4% decline. 

The numbers weakened the euro, while the dollar saw some support on market sentiments that Federal Reserve monetary stimulus that weaken the greenback to spur recovery will begin to taper in September or December — either way in the near future.

Cleveland Fed President Sandra Pianalto said Wednesday there has been “meaningful improvement” in the labor market and that tapering may be warranted if it continues to strengthen.

Chicago Fed President Charles Evans and Dallas Fed President Richard Fisher have made similar comments.

Fed officials have said they will pay close attention to data before deciding on when to taper and eventually end stimulus programs

The greenback was up against the pound, with GBP/USD down 0.19% at 1.5509.

The pound rose earlier after the Office for National Statistics said that the U.K. trade deficit narrowed by more than expected in June, improving to GBP8.08 billion from a deficit of GBP8.67 billion the previous month. 

Analysts had expected the trade deficit to narrow to GBP8.50 billion in June, though the dollar regained strength after 

The dollar was down against the yen, with USD/JPY down 0.55% at 96.18, and up against the Swiss franc, with USD/CHF trading up 0.16% at 0.9218.

The dollar was down against its cousins in Canada, Australia and New Zealand, with USD/CAD down 0.42% at 1.0285, AUD/USD up 1.02% at 0.9196 and NZD/USD trading up 0.42% at 0.8042.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.10% at 81.16.

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Forex - GBP/USD trims losses on improving U.K. trade data

The pound traded lower but steadily against the dollar in quiet trading on Friday, trimming earlier losses after U.K. trade data came in better than expected.

In U.S. trading on Friday, GBP/USD was trading at 1.5512, down 0.17%, up from a session low of 1.5498 and off from a high of 1.5558.

Cable was likely to find support at 1.5207, Wednesday's low, and resistance at 1.5574, Thursday's high.

The pound rose earlier after the Office for National Statistics said that the U.K. trade deficit narrowed by more than expected in June, improving to GBP8.08 billion from a deficit of GBP8.67 billion the previous month. 

Analysts had expected the trade deficit to narrow to GBP8.50 billion in June, which supported the pound, though the dollar regained strength after investors digested comments from Federal Reserve officials suggesting they would not rule out making a decision to taper stimulus measures such as monthly asset purchases at the bank’s September meeting.

Fed asset purchases tend to weaken the dollar, and talk of their dismantling strengthens the U.S. currency.

Cleveland Fed President Sandra Pianalto said Wednesday there has been “meaningful improvement” in the labor market and that tapering may be warranted if it continues to strengthen.

Chicago Fed President Charles Evans and Dallas Fed President Richard Fisher have made similar comments.

The pound, meanwhile, was up against the euro and down against the yen, with EUR/GBP down 0.13% at 0.8601 and GBP/JPY down 0.50% at 149.49.

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