NEW YORK (MarketWatch) — U.S. stocks closed mostly lower on Wednesday after minutes from the last Federal Open Market Committee meeting showed that a majority of officials judged the effects of the monthly asset purchases to be diminishing over time.
Investors also pondered the implications of an upbeat private-sector jobs report that was released on Wednesday morning. The S&P 500 SPX -0.02% closed down less than a point to 1,837.49. On Tuesday, the benchmark index recorded its first gain this year, snapping a three-day skid.
Federal Reserve officials agreed in December to scale back their asset-purchase program as most believed that the benefits of the controversial policy were eroding as time passed, according to minutes from their last meeting released Wednesday. By a 9-to-1 vote, the Fed on Dec. 18 decided to trim its asset-purchase program by $10 billion to $75 billion per month starting in January.
“What surprised us and other investors the most was the fact that the main reason behind the taper decision was not so much the improving economy, but what they saw as diminishing effects of the asset purchases,” said Chris Gaffney, senior market strategist at EverBank.
“The reaction was largely muted because markets have shifted their focus from tapering of the monetary stimulus back to the economy and earnings,” Gaffney said.
Automatic Data Processing said on Wednesday that private employers created 238,000 jobs in December, exceeding estimates. Economists polled by MarketWatch expected a gain of 215,000 jobs. Economists use ADP’s data to get a sense of the U.S. Labor Department’s employment report, which will be released Friday and covers government jobs in addition to the private sector. Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote that while “it is not a guarantee, the odds now favor a consensus-beating report on Friday.”
Better-than-expected jobs numbers strengthened the case for further tapering of the Federal Reserve’s bond-buying program, which has boosted equities. Phil Orlando, chief equity strategist at Federated Investors, said markets were wrong to sell off on good news and will eventually correct themselves.
“The ADP numbers were excellent today, not only did they beat consensus estimates by a wide margin, the November numbers were also revised upwards,” Orlando said.
“These numbers, as well as phenomenal numbers from the trade deficit data, have prompted many analysts to upgrade their estimates for the GDP,” he added.
Shares of Micron Technology Inc.MU -0.36% surged nearly 10% after the chip maker reported results late Tuesday that beat Wall Street expectations.
Forest Laboratories Inc. FRX +17.94% rallied 18% after announcing that it would acquire Aptalis, a specialty pharmaceutical company, for $2.9 billion in cash.
Constellation Brands Inc. STZ +0.31% shares climbed 9.6% after the beverage company beat its third-quarter earnings target and raised its full-year profit outlook.
Apollo Education Group Inc. APOL +14.20% shot up 14.2% after the for-profit education company’s quarterly earnings beat analyst estimates.
Twitter Inc. TWTR +0.19% shares fell 3.5% after Cantor Fitzgerald downgraded the social media company to sell from hold.