The Motley Fool Previous Page

Fed Speaks, Dow Crumbles

Jeremy Bowman
June 19, 2013

Well, the moment of truth finally came for investors today, but they didn't get the news they wanted. After several volatile sessions, which saw the Dow Jones Industrial Average (INDEX: ^DJI) fluctuate by  more than 100 points for several consecutive sessions on little more than hunches about Fed action, the blue chips hovered at breakeven for most of today but tumbled after Fed Chairman Ben Bernanke spoke, finishing down 206 points, or 1.4%.

In official remarks this afternoon, Bernanke said the Fed planned to begin reducing the $85 billion monthly stimulus program and fully taper it by the middle of next year if the job market continues to improve according to the Fed's projections, which call for the bond buying to end once the unemployment rate hits 7%. The rate is currently at 7.6%. The central bank also sounded optimistic about the recovery in general, saying there were fewer risks than there were a year ago and that the labor market has continued to improve.

Today's news will hopefully put an end to the market's obsession with the stimulus taper as the program should come to an end as the economy improves. The Fed's current policy is not without consequence, hurting savings rates and weakening the dollar, and an economy that no longer needs the