U.S. stocks fall on Fed minutes language; Dow down 0.70%

U.S. stocks fell on Wednesday after the Federal Reserve released the minutes of its July policy meeting, which suggested that the U.S. central bank's USD85 billion in monthly bond purchases will begin to taper soon.

Asset purchases work to stimulate the economy by driving down interest rates, which makes stocks an attractive buy, though talk of their dismantling can send stocks falling.

At the close of U.S. trading, the Dow Jones Industrial Average finished down 0.70%, the S&P 500 index fell 0.58%, while the Nasdaq Composite index fell 0.38%.

Fed language released earlier suggested monthly asset purchases will begin to taper soon, though uncertainty remained over the timing of such a decision, which sparked volatility in equities bourses Wednesday.

"Almost all participants confirmed that they were broadly comfortable with the characterization of the contingent outlook for asset purchases," the minutes read, adding two camps remain in place over the timing of tapering.

"A few members emphasized the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases. At the same time, a few others pointed to the contingent plan that had been articulated on behalf of the Committee the previous month, and suggested that it might soon be time to slow somewhat the pace of purchases as outlined in that plan."

Elsewhere, the National Association of Realtors reported earlier that existing home sales jumped 6.5% to 5.39 million annual unit rate in July from June’s revised total of 5.06 million. 

Analysts were expecting U.S. existing home sales to edge up 1.6% to 5.15 million units.

At the end of the day, investors concluded that monetary stimulus tools are on their way out and sold equities despite the better-than-expected data out of the housing market.

The National Association of Realtors reported earlier that existing home sales jumped 6.5% to 5.39 million annual unit rate in July from June’s revised total of 5.06 million. Analysts were expecting U.S. existing home sales to edge up 1.6% to 5.15 million units.

Leading Dow Jones Industrial Average performers included Wal-Mart, up 0.45%, Bank of America, up 0.28%, and IBM, up 0.16%.

The Dow Jones Industrial Average's worst performers included Alcoa, down 2.00%, Hewlett-Packard, down 1.74%, and 3M, down 1.73%.

European indices, meanwhile, finished lower.

After the close of European trade, the EURO STOXX 50 fell 0.52%, France's CAC 40 fell 0.34%, while Germany's DAX 30 finished down 0.18%. Meanwhile, in the U.K. the FTSE 100 finished down 0.97%.

On Thursday, markets will track U.S. initial jobless claims, manufacturing data and comments from Federal Reserve Bank of Dallas President Richard Fisher, who is due to appear in public.

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Forex - Dollar gains as Fed language still points to tapering

The dollar traded higher most major currencies on Wednesday after the Federal Reserve released the minutes of its July policy meeting, which indicated widespread agreement among monetary authorities that USD85 billion in monthly asset purchases should unwind soon.

However, Fed language was not as clear as markets were hoping, which allowed for choppy trading.

In U.S. trading on Wednesday, EUR/USD was down 0.30% at 1.3378.

The Federal Reserve revealed in the minutes of its July policy meeting that while support for tapering monthly asset purchases remains consistent in the U.S. central bank, the timing of such a move remains up in the air as not all voting members remain convinced that data support such a move in the near future.

Investors were hoping for more clarity.

"Almost all participants confirmed that they were broadly comfortable with the characterization of the contingent outlook for asset purchases," the minutes read, which added two camps remain in place over the timing of tapering.

"A few members emphasized the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases. At the same time, a few others pointed to the contingent plan that had been articulated on behalf of the Committee the previous month, and suggested that it might soon be time to slow somewhat the pace of purchases as outlined in that plan."

Elsewhere, the National Association of Realtors reported earlier that existing home sales jumped 6.5% to 5.39 million annual unit rate in July from June’s revised total of 5.06 million. Analysts were expecting U.S. existing home sales to edge up 1.6% to 5.15 million units.

The greenback, meanwhile, was down against the pound, with GBP/USDup 0.08% at 1.5680.

In the U.K. earlier, the Confederation of British Industry reported that its industrial orders index hit a two-year high in August, coming in a 0 compared to -12 in July.
Analysts were expecting a -8 reading for this month. 

Elsewhere, the U.K.’s public sector posted a GBP1.6 billion deficit in July compared to market calls for a GBP4.7 billion deficit.

The dollar was up against the yen, with USD/JPY up 0.61% at 97.86, and up against the Swiss franc, with USD/CHF trading up 0.55% at 0.9224.

The dollar was up against its cousins in Canada, Australia and New Zealand, with USD/CAD up 0.70% at 1.0467, AUD/USD down 0.69% at 0.9007 and NZD/USD trading down 1.40% at 0.7868.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.48% at 81.32.

On Thursday, markets will track U.S. initial jobless claims, manufacturing data and comments from Federal Reserve Bank of Dallas President Richard Fisher, who is due to appear in public.

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Forex - USD/JPY up as market digests Fed minutes, sees tapering likely

The dollar rose against the yen on Wednesday after the release of the Federal Reserve's minutes from its July policy meeting, which hinted that the U.S. central bank remains on course to tapering stimulus measures though a general lack of clarity as to when allowed for choppy trading.

In U.S. trading on Wednesday, USD/JPY was trading at 97.86, up 0.61%, up from a session low of 97.13 and off a high of 97.97.

The pair was likely to find resistance at 98.12, Monday's high, and support at 96.92, Tuesday's low.

The Fed said in the minutes of its July policy meeting released earlier that most monetary authorities see a need to begin tapering monthly bond purchases soon, which strengthened the dollar, though the U.S. central bank remained unclear whether such a decision may come in September or later in the year, which allowed for choppy trading.

The Fed is currently purchasing USD85 billion in bonds a month to spur recovery, a monetary policy tool known as quantitative easting that pushes borrowing costs down and softens the dollar in the process.

Elsewhere, the National Association of Realtors reported earlier that existing home sales jumped 6.5% to 5.39 million annual unit rate in July from June’s revised total of 5.06 million. Analysts were expecting U.S. existing home sales to edge up 1.6% to 5.15 million units.

The numbers helped strengthen the dollar earlier before all eyes turned to the Fed minutes.

The yen, meanwhile, was down against the pound and down against the euro, with GBP/JPY up 0.77% and trading at 153.56 and EUR/JPYtrading up 0.18% at 130.74.

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