By Victor Reklaitis, MarketWatch
NEW YORK (MarketWatch) -- U.S. stocks pulled back on Tuesday,
catching their breath after the Dow industrials scored another
record close on Monday.
The market was feeling a little pressure from a
worse-than-expected reading on small-business sentiment, as well as
a Fed official urging participants to prepare for a stimulus
reduction.
Joe Bell, senior equity analyst at Schaeffer's Investment
Research, said he views stocks as basically consolidating as
third-quarter earnings season winds down. He noted that there's not
been that much of a reaction to any news on Tuesday.
"It seems like we're still in the middle of digesting the strong
past month or so that we've had," Bell told MarketWatch.
The S&P 500(SPX) was last down 5 points, or 0.3%, to 1,766,
while the Dow Jones Industrial Average(DJI) fell 55 points, or
0.4%, to 15,728 after making short forays into positive territory.
The Nasdaq Composite(RIXF) shed 9 points, or 0.2%, to 3,911 after
also briefly trading higher.
Dallas Federal Reserve President Richard Fisher told CNBC on
Tuesday: "I understand there's sensitivity, but markets should also
bear in mind that this program cannot go on forever. Our balance
sheet has become bloated, and at some point we will have to taper
back on the pace of purchases, but that doesn't mean we'll stop."
Fisher was referring to the central bank's $85-billion-a-month
bond-buying program, also known as quantitative easing or QE,
that's boosted equities.
Meanwhile, the National Federation of Independent Business
reported small-business optimism dropped in October after the
government shutdown, falling to 91.6 from 93.3 in September, the
lowest reading since April.
Tuesday's dip follows a mild move up on Monday, when the Dow
achieved a record close, and Friday's big jump after a
stronger-than-expected October jobs report.
Regarding Tuesday's modest selling, Scott Redler said "some
blame" Fisher's comments on "how we can't have QE forever." But
Redler, chief strategist at T3 Live and T3 Trading Group, added in
emailed comments: "It could also just be that we need another day
or so to digest Friday's move and last week's volatility."
Markets are largely looking past everything this week until
Janet Yellen's nomination hearing on Thursday, said Craig Erlam,
market analyst at Alpari U.K., in an email. She is expected to take
over leadership of the Federal Reserve from Ben Bernanke. Yellen's
"comments on current policy, whether it's working and how much
longer it needs to continue, are going to provide the best insight
into whether the Fed is on course to taper this year and wrap
things up in the middle of 2014," Erlam said.
Schaeffer's Bell said he views stocks as a little overbought, so
he expects a period of consolidation and some choppiness before
equities begin their next leg up. Last week, the S&P 500 and
Dow both posted their fifth up week in a row. But Bell doesn't
expect a significant slide, saying many institutions and
mom-and-pop investors have been underexposed to the stock
market.
"Bigger picture, there's still a lot of doubt and sideline money
that's yet to come into this market," he said.
Two more Fed members are also due to speak Tuesday. Minneapolis
Fed President Narayana Kocherlakota, who has become the leading
dove at the U.S. central bank and will be a voting member of the
Fed's policy-making committee next year, is due to speak at 1 p.m.
Eastern time. Read Spotlight on the Economy: How concerned is the
Fed's leading dove?
Atlanta Fed President Dennis Lockhart, who recently called the
policy outlook murky, will speak at Auburn University at 1 p.m.
Eastern.
Overseas, China's Third Plenum, a major political meeting, has
finished. Communist Party leaders pledged to deepen economic
reforms to allow the market to play a "decisive" role in allocating
resources, The Wall Street Journal reported.
On the earnings front, shares of Dish Network Corp. (DISH) rose
4% after the satellite TV provider said it swung to a profit in the
third quarter. But Rackspace Hosting Inc. (RAX) shares tumbled 12%
after the cloud-computing company posted third-quarter earnings
that missed expectations late Monday.
In other markets, European stocks mostly lost ground, while
Asian equities mostly advanced. Gold prices and crude oil edged
lower, as the dollar rose.
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