U.S. Equities Mixed as Fed Minutes Signal No Large-Scale Asset Purchases

U.S. Session Key Developments

• August Consumer Confidence Rises, Chicago Purchasing Index Disappoints
• Crude Oil Posts Largest One-Day Decline Since June, Gold Rallies on Safe-Haven Appeal
• Greenback Gains on Commodity Currencies, Slips Versus Euro

U.S. stocks declined were mixed following yesterday’s slump, as today’s Fed minutes showed no plans for large-scale asset purchases in the near-term. The S&P 500 has dropped over 7 percent since its first day of trading this month, while the Dow Jones Industrial Average has declined over 6 percent. During today’s session, equity trading was quite volatile, as economic data releases sent mixed signals to market participants. Encouraging the bullish case was the backwards-looking S&P/CaseShiller Home Price Index, which showed a better-than-expected housing market in the month of June, as well as the U.S. consumer confidence report, which unexpectedly rose from a revised 51.0 reading to 53.5 in August. Offsetting this positive data, however, was a disappointing August Chicago Purchasing Index reading of 56.7, its lowest reading since 2009, as well as a worse-than-expected NAPM-Milwaukee release. The most important release of the day came during afternoon trading, however, as the Federal Open Market Committee released the minutes from its August meeting. Many traders looked for further dovish commentary from Fed officials regarding asset purchasing plans, but committee rhetoric did not call for further asset purchases in the near-term. In fact, some officials showed concern that a decision to keep securities holdings unchanged could incorrectly send signals to the markets that the central bank intends to resume large-scale asset purchases, which is currently not the case. As for the economic outlook, policy makers saw more modest second-half growth than previously expected, with low rates of inflation and a small possibility of deflationary pressures.

DJIA 30 / 10014.72 / +4.99 / +0.05%

The Dow Jones Industrial Average posted the largest gain among major U.S. indices as sixteen of its 30 blue-chip stocks closed trading in the black. JPMorgan Chase had a strong day, rising over 1.4 percent, after announcing that it will begin to shut down its proprietary trading operations to comply with new investment bank regulations. Other stocks performing well included AT&T, which rose 1.5 percent, as well as Merck and Caterpillar, which each gained over 1 percent.

S&P 500 / 1049.33 / +0.41 / +0.04%

The broad-based S&P 500 gained for the first time this week as telecommunications and basic materials shares rallied over 1 percent on the day. The telecom sector was led by a 4.6 percent increase in Sprint Nextel, after the firm announced it would expand its Colorado operation and add jobs to a plant there. Basic materials were led by a 3.6 percent gain for Cliffs Natural Resources as well as bullish trading in Newport Mining and Freeport McMoRan. Mining firms have benefited from rising metals prices, including gold and copper, which rose 0.8 percent and 2.1 percent respectively.

NASDAQ / 2114.03 / -5.94 / -0.28%

The tech-heavy Nasdaq declined for a third session in four days as the index now sits 6.8 percent lower on the year. Technology shares were especially weak today, falling nearly 0.7 percent as shares of Research in Motion and Broadcom fell over 5 percent each.

Notable US Event Risk / Economic Releases

Written by James Russell, DailyFX Research

Please send any questions or comments to JRussell@fxcm.com