“It made sense to initiate the process of bringing the program to a close,” Lacker said. “I expect further reductions in the pace of purchases to be under consideration at upcoming meetings.”
The Federal Open Market Committee, scheduled to meet Jan. 28-29, will probably reduce its purchases in $10 billion increments over the next seven meetings before ending them in December, according to a Bloomberg News survey of economists after the FOMC announced its tapering on Dec. 18. The Fed will release minutes from its last meeting on Jan. 8.
Fed Bank of Philadelphia President Charles Plosser, an opponent of bond purchases by the Fed, said central bankers may be too optimistic they can smoothly pull back accommodation.
“We like to believe that everything is going to be gradual, everything is going to be smooth, and everything is going to be hunky-dory,” Plosser said during a discussion at the Philadelphia conference. “History does suggest that the Fed, as an institution, is oftentimes late when it comes to tightening.”
Three rounds of Fed stimulus have helped propel the equities benchmark higher by as much as 173% from a 12- year low in 2009.
The S&P 500’s decline yesterday snapped a streak of five straight gains on the first trading session of January, as investors sold shares following the best annual rally since 1998. The Dow average climbed 27% last year for its best performance since 1995.
“Today is portfolio balancing and a little bargain hunting after the selloff yesterday,” Donald Selkin, who helps manage about $4 billion as the New York-based chief market strategist at National Securities Corp, said in a telephone interview. “There was no fundamental reason for the decline yesterday. Everyone was kind of stunned.”
Equity returns will slow this year, Wall Street strategists forecast. The S&P 500 will end 2014 at 1,950, according to the average of 20 estimates compiled by Bloomberg. That represents a 5.5% gain from the end of 2013.
Analysts estimate earnings for S&P 500 companies in the fourth quarter grew by 5.2%, according to data compiled by Bloomberg. Alcoa Inc. will unofficially begin the reporting season when it discloses results after the markets close on Jan. 9.
The Chicago Board Options Exchange Volatility Index, the gauge of S&P 500 options known as the VIX, fell 4.6% to 13.57, halting a four-day rally. The gauge finished 2013 with a 24% drop, the largest decline since 2009.
Seven of 10 main S&P 500 groups rose today, with financial shares rallying 0.9% to pace gains. JPMorgan Chase & Co. added 1.3% to $58.94 for the biggest gain in the Dow.
FireEye, which offers security for e-mail, files and websites, surged 37% to $56.37, the highest level since the shares began trading in September. A venture-capital firm set up by the Central Intelligence Agency invested in FireEye in 2009. Mandiant specializes in detecting malware and responding to incidents.
Delta Air Lines Inc. rose 5.7% to $29.27 for the biggest gain in the S&P 500. The airline carrier reported that a key revenue metric rose 10% in December over the same month a year prior. The company also said it expects to report more than $1 billion in operating cash flow from last month.
Sirius XM Holdings Inc. advanced 2.3% to $3.58 after Evercore Partners Inc. analyst Bryan Kraft raised the stock to overweight from equalweight.