Dow slips but other stock indexes build on records after calm reaction to Fed's taper plan

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By William Watts and Steve Goldstein

The S&P 500 index headed for a sixth day of gains and the Nasdaq Composite traded at intraday records Thursday as investors greeted a Federal Reserve decision to taper its bond purchases with relief and data showed weekly first-time claims for unemployment benefits fell to a pandemic low.

What’s happening

On Wednesday, the Dow, S&P 500 and Nasdaq Composite ended at records. The S&P 500 extended its gains for 2021 to 24%.

What’s driving markets

The implications of the Fed’s decision Wednesday to begin scaling back its bond purchase program were still being discussed by analysts Thursday. The central bank said it would start reducing purchases by $15 billion per month, after what it called substantial further progress on inflation and labor market goals.

See:Some puzzles left behind after Fed Chair Powell’s press conference

“Broadly our view on interest rate policy is that the Fed will remain patient, leaving nine months between the end of QE and any increase in rates, with our expectation of the first hike being Q1 2023. However, we would acknowledge that the risks are skewed to an earlier move,” said Ryan Djajasaputra, an economist in London for Investec.

Read:Why the Fed’s long-awaited taper announcement isn’t rattling the stock market

The focus is shifting to the U.S. employment report for October due for release from the Labor Department on Friday, as Fed Chair Jerome Powell linked the possibility of starting the interest rate-hike cycle to a jobs-market recovery. The Labor Department on Thursday said jobless benefit claims dropped by 14,000 to 269,000 in the seven days ended Oct. 30, a new pandemic low.

It may take some big surprises, however, for jobs reports to move the needle on Fed expectations, said Matt Weller, global head of research at Forex.com and City Index, in a note.

“The next several jobs reports are unlikely to influence monetary policy meaningfully unless they’re dramatically better or worse than expected for a sustained period,” he wrote. “That said, there may still be implications for fiscal policy as a major stimulus program winds its way through Congress as fears of inflation rise for the first time in decades.”

Unit-labor costs jumped 8.3% in the period from July through September, the government said Thursday. The rising costs as productivity plunged, with companies struggling to secure enough supplies on time to keep production going at full tilt.

Meanwhile, the Bank of England defied expectations for a rate increase, standing pat in its Thursday meeting.

-William Watts

Which companies are in focus?

What are other markets doing?

 

(END) Dow Jones Newswires

11-04-21 1503ET

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