Stocks lower on concern that Fed may cut stimulus sooner after survey shows strong hiring
Stocks fell in morning trading on speculation Wednesday that the Federal Reserve may pull back on its stimulus after more encouraging news about the economy.
The latest bout of investor anxiety about stimulus followed a private survey showed U.S. businesses last month added the most jobs in a year, propelled by gains in manufacturing and construction. The report comes ahead of the government's monthly employment report on Friday and follows good news about construction and manufacturing.
The yield on the 10-year Treasury note rose to its highest level in more than two months after the news.
Traders and investors are divided as to whether the beginning of the end of stimulus will be good or a bad for the stock market.
Stocks have had a strong year, surging to record highs as the Fed has bought $85 billion of bonds a month to keep long-term interest rates low and support the economy. The only two months when the stock market declined both occurred when investors thought the Fed was poised to ease back on stimulus.
Stock investors should welcome the end of the stimulus because it shows the economy is strengthening, said Doug Cote, chief market strategist at ING Investment Management.
"Ultimately, it's a good thing," said Cote. "It means the economy is standing on its own two feet."
The Dow Jones industrial average dropped 22 points, or 0.1 percent, to 15,892 in morning trading. The Standard & Poor's 500 index fell two points, or 0.1 percent, to 1,793. The Nasdaq composite was flat at 4,307.
Stocks have had a poor start to December, which is statistically one of the strongest months for stock investors. The S&P 500 has dropped 0.6 percent so far this month, paring its annual gain to 25.4 percent. If it closes at that level, the index will still log its best year in a decade.
In government bond trading, the yield on the 10-year note climbed to 2.83 percent from 2.78 percent.
In commodities trading oil rose 87 cents, or 0.9 percent, to $96.92. Gold climbed $7.20, or 0.6 percent, to $1,227.90 an ounce.
Among stocks making big moves;
- Sears fell $4.71, or 8.5 percent, to $50.84 after billionaire hedge-fund manager Eddie Lampert reduced his stake in the department store chain to less than half.
- Express fell $4.58, or 18.6 percent, to $20.08 after the clothing retailer reported earnings that missed analysts' estimates.