Fed Bank of Atlanta President Dennis Lockhart, a backer of record stimulus, said any decision to taper bond purchases should be accompanied by a limit on the size of the program or a timetable for ending it.
“If and when the FOMC arrives at a decision to wind down asset purchases, it’s my view that it will be helpful to the transition process to provide as much certainty as possible about how this will be done,” Lockhart said in a speech today.
Policy makers, who next meet Dec. 17-18, will probably wait until the March 18-19 Federal Open Market Committee session before reducing monthly bond purchases to $70 billion from $85 billion, according to the median estimate in Bloomberg’s latest survey of economists conducted on Nov. 8.
U.S. budget negotiators plan to work this weekend on a possible deal to ease automatic spending cuts to just one year amid objections from affected groups and lawmakers in both parties, said people familiar with the talks. The bipartisan panel of 29 members has a self-imposed Dec. 13 deadline for a plan. Federal spending authority expires on Jan. 15.
The S&P 500’s rally this year has pushed valuations higher, with the equity benchmark trading for about 16.1 times its constituents’ projected earnings, up 23% from the beginning of 2013 when it traded at 13.1 times projected profit.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, rose 4.2% to 15.32, the highest level in six weeks. The measure has rallied eight straight sessions, its longest advance since April 2012.
All 10 main S&P 500 industries fell today. Phone stocks paced declines with a 1.1% retreat. Verizon Communications Inc. slipped 1.2% to $48.80.
An S&P index of diversified financial firms fell 1.1% for the biggest drop in the equity gauge. Morgan Stanley lost 2.8% to $30.26 and JPMorgan Chase & Co. dropped 1.9% to $56.08.
U.S. regulators plan to vote Dec. 10 to adopt the final version of the Volcker rule, a key part of the Dodd-Frank Act that bans banks from making speculative bets with their own money. Treasury Secretary Jacob Lew left open during a speech today the possibility that he may push for tougher financial rules.