Stocks rebound, dollar weakens after FOMC minutes

By Herbert Lash

NEW YORK (BestGrowthStock) – U.S. stocks (Read more about the stock market today. ) rebounded and the dollar eased on Tuesday on news that policymakers at the last meeting of the Federal Reserve suggested they are closer to increasing money supply to revive a struggling U.S. economy.

Markets reversed course after minutes from the September 21 meeting of the Federal Open Market Committee showed officials discussed several ways to aid the economy but focused on buying additional longer-term Treasury securities.

Fed policymakers also discussed how to nudge the public into expecting higher levels of inflation in the future, which would inflate asset prices, especially commodities and stocks.

The euro rallied against the dollar and Wall Street snapped back, aided by a higher price target for Apple Inc (Read more about Apple stock future.) and comments by Lee Ainslie, a well-known hedge fund manager, who said technology stocks are the cheapest they have been in 20 years.

The view from Fed policymakers contrasted sharply with comments by European Central Bank Governing Council member Axel Weber, who said the ECB’s government bond-buying program has not worked and should be scrapped.

The euro was up 0.32 percent at $1.3918, well off the session low of $1.3775.

Expectations that the Fed is poised to bolster the economy has spurred a worldwide equity rally. The S&P 500 index is up 11.3 percent since the start of September, and last month’s performance was one of the best months for stocks in a decade.

MSCI’s all-country world equity index (.MIWD00000PUS: ) has posted a 12.1 percent gain since the beginning of September. The index pared a 1 percent loss to close down 0.2 percent.

“It looks like the Fed is moving closer to another round of quantitative easing,” said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

“The Fed has almost boxed themselves into a corner in the sense that the market expects some type of activity. The only question is, ‘How much and when?'” Sheldon said.

Trading in Tokyo was poised to open lower, with the December futures contract that trades in Chicago for the Nikkei 225 down 180 points at 9,475.

The Dow Jones industrial average (.DJI: ) closed up 10.06 points, or 0.09 percent, at 11,020.40. The Standard & Poor’s 500 Index (.SPX: ) rose 4.45 points, or 0.38 percent, to 1,169.77. The Nasdaq Composite Index (.IXIC: ) gained 15.59 points, or 0.65 percent, to 2,417.92.

Spot gold fell $2.60 to $1,350.30 an ounce, recouping part of earlier losses.

U.S. Treasury debt prices eased after lackluster demand in an auction of three-year notes spurred some worries over the potential success of remaining debt auctions this week.

Losses were limited, however, because of the notion the Fed will go ahead with another program of quantitative easing in the near future, which many expect will include an expansion of Treasury debt purchases.

The benchmark 10-year U.S. Treasury note was down 8/32 in price to yield 2.42 percent. The 2-year U.S. Treasury note slipped 2/32 in price to yield 0.367 percent.

Oil slid for a second day, falling below $82 a barrel after Saudi Arabia signaled the Organization of Petroleum Exporting Countries would maintain current production levels, while gold eased on the dollar’s bounce.

Saudi Arabian Oil Minister Ali al-Naimi said on Monday he was happy with the oil market as he arrived in Vienna for the first OPEC meeting in seven months, set for Thursday.

U.S. crude for November settled down 54 cents at $81.67 a barrel. In London, ICE Brent settled down 22 cents at$83.50.

The euro swung wildly between gains and losses throughout the session but finally settled in positive territory after the Fed minutes were released.

“The comments support and reinforce the view that there will be Fed policy action at the November meeting,” said Nick Bennenbroek, head of FX strategy at Wells Fargo in New York. “This seems to be the consensus now and so we’re seeing the euro gaining against the dollar.”

The dollar fell against a basket of major currencies, with the U.S. Dollar Index (.DXY: ) down 0.14 percent at 77.337.

Against the Japanese yen, the dollar was down 0.32 percent at 81.82.

In Asia, Japan’s Nikkei (.N225: ) closed down 2.1 percent at 9,388.64, while Asian stocks were down 1.3 percent, according to the MSCI Asia ex-Japan index (.MIAPJ0000PUS: ).

(Reporting by Rodrigo Campos, Nick Olivari, Wanfeng Zhou, Emily Flitter in New York; Writing by Herbert Lash; Editing by Dan Grebler)

Stocks rebound, dollar weakens after FOMC minutes