Just when we thought we knew what to expect from Fed policy, along comes Federal Reserve Bank of Philadelphia President Charles Plosser to shake things up, cause stocks, which were just starting to get things going, to give back their gains. Big losers today include Peabody Energy (BTU), Cliffs Natural Resources (CLF) and Exelon (EXC).
Bloomberg The Wall Street Journal’s Michal Derby has the details on Plosser’s remarks:
The Federal Reserve is facing daunting challenges when it comes to eventually ending its current easy money stance, and it might have to raise short-term rates faster than many expect, warned Federal Reserve Bank of Philadelphia President Charles Plosser.
While he didn't say the central bank is on the edge of needing to raise rates off of their current rock-bottom levels, the official fretted the Fed confronts a wide range of uncertainties about how that process will play out. Mr. Plosser has been a long-term skeptic of the Fed's bond-buying stimulus efforts, and he's been uncomfortable with the duration of very low short-term rates.
Oh. And Plosser will also be a voting member on the FOMC this year.
Investors entered this year expecting a slow taper, one that would reduce liquidity in the financial system but not enough to dent the economy. But that view ultimately depends on growth picking up a little but not growing too hot or too cold. It’s Goldilocks as the prisoner’s dilemma.
The S&P 500 is little changed at 1,831.50 at 2:07 p.m. after being up as much as 0.2%, while the Dow Jones Industrial Average has ticked up 0.1% to 16,455.54. Among the biggest losers: Coal miner Peabody Energy, which has fallen 4.1% to $18.73, iron miner Cliffs Natural Resources, which is off 3.2% at $25, General Motors (GM), which has fallen 3.4% to $39.58 after reporting horrendous sales today, and Exelon, which has declined 2.3% to $26.54 after it was downgraded by Citigroup.
So much for a happy New Year.
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