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Wall Street in flurry over the Federal Reserve

New York Stock Exchange

New York Stock Exchange Photo Credit: New York Stock Exchange (Getty Images)

It’s been obvious in the past few months that expectations about the Federal Reserve’s intentions on the future of its easy-money policies have been a bigger influence on the stock market than any other economic data.

That was made clear again last week when U.S. stocks plunged after Fed chairman Ben Bernanke indicated that his agency might scale back its asset-purchase program if the labor market continued to improve.

As such, Wall Street will once again turn to the central bank for potentially market-moving news this week.

Several members of the Fed will give speeches this week, and investors are hoping that they might provide greater clarity on the Fed’s plans to taper its $85-billion-a-month bond-buying program.

Among those scheduled to speak are Minneapolis Fed President Narayana Kocherlakota, who will talk about monetary policy to the Society for Economic Dynamics in Seoul, and Atlanta Fed President Dennis Lockhart, who will give a speech on the economic outlook to the Kiwanis Club in Marietta, Ga., on Thursday.

Given how the market has tanked on the mere possibility of the tapering of the Fed’s quantitative easing, some experts in the financial world doubt that the central bank will actually cut back on its bond purchases.

“Investors reacted ... like trust fund kids being told that daddy is going to cut their monthly allowance. How are they going to cope without the Fed’s largesse?” commented The Economist’s Buttonwood column.

“It is a sad state of affairs that the supposed ‘Masters of the Universe’ who pride themselves on their Darwinian skills in beating the market should be so dependent on what is, in effect, an arm of central government.”


Sterling Wong is a business and financial journalist at Minyanville.com. He is an economics graduate of Sarah Lawrence College.
 

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