U.S. stocks dipped on Friday after comments made by Federal Reserve officials said a reduction of the Fed's monthly bond purchases may begin in October. According to St. Louis Fed Bank President James Bullard, low inflation means the Fed can be patient in deciding when to scale back its pace of asset purchases.
By Chuck Mikolajczak
September 20, 2013: 12:38 PM ET
U.S. stocks dipped on Friday as investors grappled with comments by Federal Reserve officials in the wake of the central bank's decision not to trim its stimulus, but two companies made initial public offerings with stellar results.
St. Louis Federal Reserve Bank President James Bullard, interviewed by Bloomberg TV, said a reduction of the Fed's $85 billion monthly bond purchase program beginning in October was possible.
On Wednesday, the Fed surprised economists and investors with its decision to delay scaling back its stimulus.
Bullard also said in a speech in New York later that low inflation meant the Fed can be patient in deciding when to scale back its pace of asset purchases.
"The fact of the matter is they (the Fed) basically had a 'freebie.' The markets had already adjusted for all this. They (the Fed) would be able to take the first step in doing some tapering," said Stephen Massocca, managing director at Wedbush Equity Management LLC in San Francisco.
"The market will view this as a bad move on their part, and we are already seeing that today. It is also a reflection on what the Fed didn't do and some disappointment with that."
Kansas City Federal Reserve Bank President Esther George told the Shadow Open Market Committee in New York that the central bank needs to move away from the bond-buying policy and called the decision not to taper disappointing.
Even with the indexes declining, new stock offerings by cybersecurity company FireEye Inc (FEYE.O) and advertisement technology company Rocket Fuel Inc (FUEL) managed to debut with spectacular results.
FireEye shares opened 101.5 percent above the initial public offering price at $40.30 and last traded up 87.8 percent to $37.56. Rocket Fuel also more than doubled in its trading debut, and recently traded up 91.4 percent to $55.52.
The Dow Jones industrial average (^DJI) fell 110.32 points or 0.71 percent, to 15,526.23, the S&P 500 (^GSPC) lost 9.61 points or 0.56 percent, to 1,712.73 and the Nasdaq Composite (^IXIC) dropped 9.017 points or 0.24 percent, to 3,780.367.
Trading volume was heavier than usual as Friday marks the "quadruple witching," when stock index futures, stock index options, stock options and single stock futures all expire on the same day. Trading increases as investors replace or repurchase existing contracts.
In addition to the quadruple witching, all three major U.S. stock indexes, as well as the FTSE and U.S. index trackers, will rebalance their portfolios to match revisions to index weights. This happens at the close of trading, which could push trading volume higher as transactions jump at the exact close.
"Since the largest of these products which are index futures and options expire on the open, the effect is most pronounced at the open. However, with stock and ETF expirations, as well as index rebalancing, occurring at the close, there can also be significant impact on the close," said Ana Avramovic, derivatives Strategist at Credit Suisse in New York, in a note to clients.
Caterpillar Inc (CAT) was the biggest drag on the Dow, down 2.5 percent to $85.59 after the maker of heavy machinery reported sales for the three-month rolling period ending in August.
Apple Inc (AAPL), which rose 0.6 percent to $474.91, helped curb declines on the Nasdaq as the company's latest version of its iPhone product line hit stores around the world.
The Dow industrials and the S&P 500 index were on track to show a gain for the week, aided by a rally on Wednesday that took both indexes to record highs after the Fed's decision.
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