Japan's Nikkei Plunges 7%; U.S. Stocks Indicated Lower
FREE Breaking News Alerts from StreetInsider.com!
StreetInsider.com Top Tickers, 9/1/2026
- Wall St kicks off September under pressure as higher yields, oil prices weigh
- Oil prices jump 4% as fresh US-Iran fighting stokes supply fears
- Two Saudi tankers struck in Strait of Hormuz Monday
- Fed’s Barr backs rate hike if inflation fails to cool, September odds hit 66%
- The Warsh pivot markets didn't expect
Number of FOMC Members Willing to Taper as Early as June Meeting
May 22, 2013 2:16 PM EDTBelow is the excerpt from the FOMC minutes from the April 30-May 1, 2013 meeting traders are focusing on. It essentially said a number of FOMC members want to taper asset purchases as early as the June meeting.
"Participants also touched on the conditions under which it might be appropriate to change the pace of asset purchases.... More
FOMC Minutes April 30-May 1, 2013
May 22, 2013 2:04 PM EDTDevelopments in Financial Markets and the Federal Reserve's Balance Sheet
The Manager of the System Open Market Account (SOMA) reported on developments in domestic and foreign financial markets as well as the System open market operations during the period since the Federal Open Market Committee (FOMC) met on March 19-20, 2013. By unanimous vote, the Committee ratified the Open Market Desk's domestic transactions over the intermeeting period. There were no intervention operations in foreign currencies for the System's account over the intermeeting period.
By unanimous vote, the Committee agreed to extend the reciprocal currency (swap) arrangements with the Bank of Canada and the Banco de México for an additional year beginning in mid-December 2013; these arrangements are associated with the Federal Reserve's participation in the North American Framework Agreement of 1994. The arrangement with the Bank of Canada allows for cumulative drawings of up to $2 billion equivalent, and the arrangement with the Banco de México allows for cumulative drawings of up to $3 billion equivalent. The vote to renew the System's participation in these swap arrangements was taken at this meeting because a provision in the Framework Agreement requires each party to provide six months' prior notice of an intention to terminate its participation.
Staff Review of the Economic Situation
The information reviewed at the April 30-May 1 meeting indicated that economic activity expanded at a moderate pace in the first quarter. In March, the unemployment rate edged down further, although it continued to be elevated, and employment growth slowed. Consumer price inflation was relatively low, while measures of longer-run inflation expectations remained stable.
After faster gains in January and February, private nonfarm employment increased at a subdued rate in March, and government employment declined slightly. The unemployment rate was 7.6 percent in March, a little below its average in the fourth quarter of last year. The labor force participation rate also edged down to below its fourth-quarter average. The rate of long-duration unemployment and the share of workers employed part time for economic reasons declined somewhat in March, but these measures remained well above their pre-recession levels. Indicators of near-term labor market conditions were consistent with projections of moderate increases in employment in the coming months: Measures of job openings generally moved up, but the rate of gross private-sector hiring and indicators of firms' hiring plans were subdued, on balance, and initial claims for unemployment insurance trended up a little over the intermeeting period.
Manufacturing production decreased slightly in March but expanded at a brisk rate in the first quarter as a whole, supported in part by a recovery in output following Hurricane Sandy, and the rate of manufacturing capacity utilization in March was somewhat higher than in the fourth quarter. The production of motor vehicles and parts rose solidly in March, but factory output outside of the motor vehicle sector declined. Automakers' schedules indicated that the pace of motor vehicle assemblies in the coming months would be a bit below that in March. Broad indicators of manufacturing production, such as the diffusion indexes of new orders from the national and regional manufacturing surveys, were at levels that pointed to small increases in factory output in the near term.
Real personal consumption expenditures (PCE) expanded at a solid pace in March and in the first quarter as a whole. Some factors that tend to influence household spending were generally positive in recent months. For example, real disposable income increased in February and March, supported in part by recent declines in retail gasoline prices that raised household purchasing power and offset to some extent the effects of this year's higher payroll and income taxes. In addition, household net worth likely rose in recent months as a result of higher equity values and home prices. In contrast, consumer sentiment in the Thomson Reuters/University of Michigan Surveys of Consumers was roughly flat, on balance, in March and April and remained relatively downbeat.
Conditions in the housing sector continued to improve, as real expenditures for residential investment expanded briskly in the first quarter, although from a low level. Total combined starts of new single-family homes and multifamily units increased in March to a level well above that at the beginning of the year. Home prices continued to rise through February, and sales of new homes rose in March, but sales of existing homes decreased a little.
Growth in real business expenditures on equipment and software slowed in the first quarter. Nominal shipments of nondefense capital goods excluding aircraft continued to rise gradually in February and March, but new orders were slightly below the level of shipments, pointing to modest gains in shipments in the near term. Other forward-looking indicators, such as surveys of business conditions and capital spending plans, also suggested that outlays for business equipment would rise at a subdued pace in the coming months. Real business spending for nonresidential construction declined a little in the first quarter. Real inventory investment increased in the first quarter, and business inventories in most industries appeared to be broadly aligned with sales in recent months.
Real federal government purchases declined markedly in the first quarter, led by a significant decrease in defense spending, which may have partially reflected the anticipated effects of the federal spending sequestration. Real state and local government purchases also decreased somewhat in the first quarter, as state and local construction expenditures continued to decline.
The advance release of first-quarter data for the national income and product accounts showed that real net exports of goods and services also subtracted moderately from real gross domestic product (GDP) growth, as real imports outpaced real exports.
Overall consumer prices, as measured by the price index for PCE, edged down in March and rose just 1 percent from a year earlier. Consumer energy prices declined in March, and retail gasoline prices fell further in the first few weeks of April. Consumer food prices only edged up in March. Consumer prices excluding food and energy were flat in March, and their increase from 12 months earlier was similar to that for total consumer prices. Near-term inflation expectations from the Thomson Reuters/University of Michigan Surveys of Consumers were slightly lower in April, and longer-term inflation expectations in the survey were little changed and remained within the narrow range that they have occupied for several years.
Measures of labor compensation indicated that gains in nominal wages remained subdued. Increases in the employment cost index were modest over the year ending in the first quarter. Average hourly earnings for all employees were unchanged in March, and hourly earnings gains in the first quarter as a whole were muted.
Economic growth in foreign economies overall in the first quarter of 2013 showed only a small improvement from that registered in the second half of 2012. Real GDP growth picked up in the United Kingdom, and recent indicators suggested that the pace of contraction moderated in the euro area. In contrast, economic growth in China slowed abruptly after surging late last year. Foreign inflation appeared to increase a little in the first quarter, partly as a result of higher food prices in several emerging market economies, but remained quite moderate.
Staff Review of the Financial Situation
Financial conditions improved a little, on balance, over the intermeeting period. Yields of longer-term Treasury securities and foreign benchmark sovereign bonds declined appreciably, reflecting the somewhat negative tone of U.S. and foreign economic data releases as well as policy actions by the Bank of Japan that were more accommodative than the markets had expected. Equity prices rose modestly, on net, supported in part by solid quarterly earnings reports.
The expected path of the federal funds rate implied by market quotes shifted down moderately over the intermeeting period. However, the Desk's survey of primary dealers, conducted prior to the April 30-May 1 meeting, indicated that the dealers continued to view the third quarter of 2015 as the most likely time for the initial increase in the target federal funds rate. The median dealer anticipated that the FOMC would maintain its current pace of asset purchases through December 2013 and saw the second quarter of 2014 as the most probable time for the end of asset purchases, implying a slight upward revision to the projected total size of the Federal Reserve's asset purchase program.
Over the intermeeting period, near-term measures of inflation compensation derived from yields on nominal and inflation-protected Treasury securities moved lower amid somewhat disappointing economic data and declines in energy and other commodity prices; forward measures of inflation compensation changed little at longer horizons. Yields on agency mortgage-backed securities (MBS) decreased about in line with those on nominal Treasury securities of comparable duration.
Conditions in domestic dollar funding markets were generally little changed, and offshore dollar funding markets reacted only modestly to the elevated uncertainty surrounding the negotiations, early in the intermeeting period, to resolve the banking crisis in Cyprus.
Some indicators of the condition of domestic financial institutions weakened slightly. Share prices for the largest domestic banking organizations declined somewhat, on balance, and bank credit default swap spreads edged a bit higher, on average, across the larger firms in the sector.
Broad equity price indexes increased, on net, over the intermeeting period, likely reflecting solid quarterly earnings reports, stable medium-term earnings expectations, and lower interest rates. Option-implied volatility... More
Stocks Pull Back after Bernanke Says Worries About Financial Stability 'Increased a Bit'
May 22, 2013 11:02 AM EDTAfter an initial positive response to Fed Chairman Ben Bernanke's prepared comments warning against "premature tightening," comments about his increasing concern about financial stability from the Congressional... More
