Stocks managed to push higher last week, as many traders now suspect that the Federal Reserve will either keep up the pace, or only slightly alter, its bond buying program at its next Federal Open Market Committee (FOMC) meeting in September. The “dovish” comments from the FOMC last week actually downgraded the outlook for the economy, and that argues favorably for no “tapering” of the current quantitative-easing policies. Of course, the Fed now is “data dependent” and that means any good news on the labor front could change the Fed’s course.
Last Friday’s July jobs report was slightly below expectations in terms of the number of new jobs created, but the unemployment rate did fall to 7.4%. That’s a multi-year low, and it does argue in favor of the Fed taking some kind of tapering action six weeks from now.
The nervousness about tapering has caused stocks to pull back off of their highs this week. During the past four weeks, the Dow basically has been flat. The SPDR DJ Industrial Average (DIA) now trades where it did back in mid-July.
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