U.S. Reported Inflation Measure Steady, Fed Weighs Taper Plan

Nichole Harper
17 Dec, 2013
New York City

U.S. market indexes drifted lower and the dollar edged slightly higher against the euro and the yen. Fed is scheduled to wrap up its 2-day meeting tomorrow. U.S. government

[R]1:20 PM New York – U.S. market indexes drifted lower and the dollar edged slightly higher against the euro and the yen. Fed is scheduled to wrap up its 2-day meeting tomorrow. U.S. government’s measure of inflation was flat in November. German economic sentiment index is at 7-year high.[/R]

U.S. stocks drifted lower and Fed policy makers gather last time in the year to discuss bond purchase program and health of the economy.

Investors are speculating about the timing of the Fed taper plan and market indexes have been supported by the Fed’s monthly purchase of $85 billion of bonds.

S&P 500 index declined 6.42 to 1,780.12 and the Nasdaq Composite Index declined 8.62 to 4,020.90.

Budget Deal Nears Senate Approval

Investors also voiced optimism after a bipartisan deal raised the prospect of a budget deal.

The Senate today cleared a procedural hurdle by a vote of 67-33 to end debate and move forward in approving the legislation.

Senate Budget Chairwoman Patty Murray and House Budget Chairman Paul Ryan crafted a budget agreement that is scheduled for vote in the Senate by Thursday. The budget agreement already cleared the House of Representatives last week and President Obama has already voiced his approval of the deal.

November CPI Unchanged

Consumer price index in November was unchanged from the previous month and core rate of inflation excluding food and energy gained 0.2%, according to the data released today by the Labor Department.

The index increased 1.2% from a year ago month after rising 1% in the year ending in October.

Fed uses its preferred measure of inflation, personal consumption expenditure which increased 0.7% in the 12 months to October.

The Fed and the government measures of inflation understate the inflation experienced by most families because the gauges under weigh the cost of medical care, education and transportation.

European Markets

European markets declined after gaining 1.3% in the previous day of trading and investors sold stocks ahead of Fed decision tomorrow.

Market indexes fell despite positive economic data from the U.S. and Asia and German economic sentiment index was at its highest since April 2006.

In London trading, FTSE 100 index fell 0.3% or 21.19 to 6,501 and in Frankfurt the DAX index slid 0.3% or 32.17 to 9,131.

In Paris, CAC 40 index dropped 0.9% or 37.28 to 4,083.

U.S. Stocks in Review

3M gained 2% after the maker of consumer products lifted its quarterly dividend 35% and extended its annual dividend increase for the 55th year in a row.

AT&T eased 1% after the wireless and wireline telecom carrier agreed to sell its wireline business and fiber network in Connecticut to Frontier Communications for $2 billion.

Frontier Communications soared 8%.

KKR Financial rose after it agreed to be acquired by KKR & Co in $2.6 bill all-stock deal. The move by the leverage buyout company will bring its sister company under its full control.