His Dallas counterpart, Richard Fisher, said in a Chicago speech that the Fed needs to begin tapering “at the earliest opportunity,” as the current pace of stimulus “comes at a cost that far exceeds its purported benefits.”
The central bank will also be watching the outcome of U.S. budget talks. Fed officials cited the drag from fiscal policy in their Oct. 30 statement and Jeffrey Lacker, president of the Richmond Fed, said in a speech today that U.S. budget uncertainty is also weighing on business hiring and investment decisions.
Congressional negotiators are nearing a deal to trim automatic spending cuts and break a three-year stretch of failed fiscal talks in Washington. Aides to Republican Representative Paul Ryan and Democratic Senator Patty Murray, chief negotiators on a special panel, say they are optimistic for a compromise by a Dec. 13 deadline.
The 29-member budget conference panel was set up by the legislation that ended the 16-day government shutdown in October, with the goal of getting both chambers of Congress back to regular order in devising a budget plan for Congress.
“Our fundamental view is that any tapering-related pullback will be a temporary selloff,” said Dan Morris, who helps oversee about $520 billion as global investment strategist at TIAA-CREF Asset Management in New York. “Valuations and earnings are good. We don’t see a bubble in U.S. stocks.”
The S&P 500 has gained 27% in 2013 as the Fed refrained from trimming its $85 billion a month of bond purchases. The gauge is trading at 16.2 times the projected earnings of its constituents, compared with a 10-year average of almost 14.9.
Household wealth in the U.S. increased from July through September as improvement in the home and equity markets boosted American balance sheets. Net worth for households and non-profit groups rose by $1.92 trillion in the third quarter, or 2.6% from the previous three months, to $77.3 trillion, the Federal Reserve said today from Washington.
Data today from China showed the country’s trade surplus widened last month to the largest in more than four years as exports exceeded estimates, in a sign global demand is helping sustain a recovery in the world’s second-biggest economy. Consumer prices rose a slower-than-estimated 3%, a statistics-bureau report showed today.
In Japan, third-quarter growth slowed more than initially estimated and the current account unexpectedly fell into deficit in October.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, rose 0.9% to 13.91.
Eight of 10 main S&P 500 industries advanced today, with industrial and materials companies climbing 0.4% to pace the gains. General Electric Co. added 1.2% to $27.27 for the biggest gain in the Dow.
Financial firms rose 0.3% as a group, a day before five U.S. agencies will finish the Volcker rule, which aims to reduce the chances that banks will put federally insured depositors’ money at risk by largely banning proprietary trading.
JPMorgan Chase & Co. climbed 0.7% to $56.45 and Goldman Sachs Group Inc. added 0.2% to $167.57.