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Investing Specialists

Markets Dread the Fed

The news out of the Fed this week wasn't nearly as bad as the market reaction suggested.

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U.S. stock markets were down this week, breaking a seven-week string of winners in 2013. What's difficult to determine is if the declines were due to a reaction to real news or a market that was looking for a reason to pause.

This week's proximate cause for decline was the release of minutes from the Federal Reserve Open Market Committee meeting. The minutes showed that there was less than total agreement on all of the Fed's monetary easing programs. Some members seemed to feel that the risks of additional easing (inflation, asset bubbles, savings disincentives, and so on) were not worth the benefits of additional easing policies. There were even hints from some members that some of the easing might need to be withdrawn before the economy has entirely recovered. (So much for cheap money forever.) The stock market's vote on the minutes came quickly, with the Dow falling more than 100 points within an hour of publication.

Robert Johnson, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.