A Bullish Fed Sparks a Sell-Off on Wall Street

The Federal Open Market Committee meeting has ended, and the Fed is bullish on the state of the economy. Unemployment is expected to fall as low as 6.5% next year and may even reach 6% in 2015. Inflation is expected to be lower than expected this year, but in the next two years it should remain at 2% or less, a forecast that doesn't indicate tightening of monetary policy anytime soon.

The market had been looking for signs of tapering of the Fed's $85 billion-per-month bond-buying program, but the Fed didn't change its statement, so we still don't know when that easy money will end. All in all, it was a bullish statement about the economy, but it sparked a sell-off in afternoon trading. As of 3:25 p.m. EDT the Dow Jones Industrial Average (DJINDICES: ^DJI  ) has fallen 0.83%, and the S&P 500 (SNPINDEX: ^GSPC  ) is down 0.79%.

It's worth noting that the sell-off that hit markets upon the Fed's announcement affected everything from stocks to commodities. Gold fell sharply and is now down 0.5% for the day, and oil is down slightly to $98.25. The market's knee-jerk reaction can cause head-scratching, especially on Fed-focused days.  

On a company level, shares of telecommunications giants AT&T (NYSE: T  ) and Verizon (NYSE: VZ  ) are down 1.7% and 2.2%, respectively, to lead the Dow's decline today. DISH Network dropped its bid to buy Sprint Nextel (NYSE: S  ) , leaving the door wide open for SoftBank to step in and buy the company. That would be the best-case scenario for Sprint from a competitive standpoint, because SoftBank could provide the funding necessary to build out a network that could rival AT&T and Verizon Wireless.

On the flip side, AT&T and Verizon Wireless would hate to see additional competition, given their comfortable duopoly in the lucrative wireless business. Sprint is years behind both companies in building wireless infrastructure, but it could build a formidable opponent with a new owner.

The Motley Fool's chief investment officer has selected his No. 1 stock for the next year. Find out which stock it is in the special free report "The Motley Fool's Top Stock for 2013." Just click here to access the report and find out the name of this under-the-radar company.


Read/Post Comments (0) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2498709, ~/Articles/ArticleHandler.aspx, 12/17/2014 4:46:43 PM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement