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 some pressure from Fed officials warning
about a potential stimulus reduction, as well as from a
worse-than-expected reading on small-business sentiment.
Joe Bell, senior equity analyst at Schaeffer's Investment
Research, said he views stocks as basically consolidating as
third-quarter earnings season winds down.
"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 9 points, or 0.5%, to 1,763,
while the Dow Jones Industrial Average(DJI) fell 72 points, or
0.5%, to 15,711 after making short forays into positive territory.
The Nasdaq Composite(RIXF) shed 15 points, or 0.4%, to 3,905 after
also briefly trading higher.
Atlanta Fed President Dennis Lockhart on Tuesday said the
central bank could cut back on its bond buys as soon as next month.
"I don't think the circumstances rule out a consideration in
December," Lockhart told Bloomberg Radio. The $85-billion-a-month
bond-buying program, also known as quantitative easing or QE, has
boosted equities
Earlier Tuesday, Dallas Fed President Richard Fisher also warned
about a stimulus reduction. He told CNBC: "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."
Minneapolis Fed President Narayana Kocherlakota spoke Tuesday as
well, noting that markets are puzzled by all the taper talk.
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 slip 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 early
Tuesday that "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.
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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