September 21, 2011 12:17 PM
U.S. Stocks Decline as Investors Await Federal Reserve Decision
Sept. 21 (Bloomberg) -- U.S. stocks declined, sending the Standard & Poor's 500 Index down for a third straight day, as investors awaited a Federal Reserve announcement that may signal more stimulus for the world's largest economy.
Coal and railroad companies slumped as Alpha Natural Resources Inc. tumbled 7.7 percent after cutting its 2011 shipment forecast. The Dow Jones Transportation Average, a proxy for the economy, lost 2.6 percent. Hewlett-Packard Co. rose 3.1 percent as the company was said to be weighing an ouster of Leo Apotheker as chief executive officer. Oracle Corp. climbed 7.1 percent as profit topped analysts' estimates.
The S&P 500 fell 0.6 percent to 1,195.53 at 11:28 a.m. New York time. The index swung between gains and losses through the first hour of trading, rising briefly after a larger-than- forecast increase in home sales. The Dow Jones Industrial Average lost 57.18 points, or 0.5 percent, to 11,351.48.
“The market is on hold,” Peter Tuz, who helps manage $1 billion as president of Chase Investment Counsel in Charlottesville, Virginia, said in a phone interview. “The idea of ‘Operation Twist' is to keep longer rates lower and even push them down. As for the effect on the economy, who knows? Interest rates are too low already.”
Stocks fell yesterday on speculation Greece wasn't closer to receiving more aid. Between April 29 and Aug. 8, the S&P 500 lost as much as 18 percent amid concern about global growth. Since then, the index has risen 7.4 percent through yesterday.
Fed Statement
The Federal Open Market Committee may announce a plan to replace short-term Treasuries in its $1.65 trillion portfolio with long-term bonds in a bid to lower rates for mortgages, auto and consumer loans, according to 71 percent of 42 economists surveyed by Bloomberg News. The Fed is scheduled to issue its policy statement at about 2:15 p.m. in Washington.
The expected plan, which would lengthen the average duration of bonds in the Fed's portfolio, would mimic a policy in 1961 known as “Operation Twist” for its goal of bending the yield curve. Within the first month, the program may push down the yield on the 10-year Treasury security by 0.15 percentage point, said Chris Rupkey, chief financial economist of Bank of Tokyo-Mitsubishi UFJ Ltd., in New York.
“We're going to see a QE2 and a half or what folks have been calling Operation Twist,” Philip Orlando, the New York- based chief equity market strategist at Federated Investors Inc., which oversees about $355 billion, said in a telephone interview. “If they're successful, a stock market rally and an enhanced wealth effect will create additional spending and job creation.”
Full story: http://news.businessweek.com/article.asp?documentKey=1376-LRV71X1A1I4H01-73TQO1OGKGPIC5BSCM6DATFLSR
Gold is $1,581/oz today. When it hits $2,000, it will be up 26.5%. Let's see how long that takes. - De 3/11/2013 - ANSWER: 7 Years, 5 Months
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