Fed split on stimulus plans nudges stocks lower

NEW YORK (AP) — Stocks are fading into the close of trading on Wall Street after the Federal Reserve revealed a split among its policymakers over how long to continue an economic stimulus program.
The market started on a weak note Thursday following mixed holiday sales reports from retailers and the prospect of another fiscal fight looming in Congress over the nation's borrowing limit.
The Dow Jones industrial average finished down 21 points at 13,391. The Dow surged 308 points the day before, its biggest gain in more than a year.
The Standard & Poor's 500 index lost three points to end at 1,459. The Nasdaq composite lost 11 to end at 3,100.
Rising stocks outnumbered falling ones on the New York Stock Exchange. Volume was 3.8 billion shares, above the recent average.

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Fed becoming worried about stimulus side effects

Federal Reserve officials are increasingly concerned about the potential risks of the U.S. central bank's asset purchases on financial markets, even if they look set to continue an open-ended stimulus program for now.
In a surprise to Wall Street, minutes from the Fed's December policy meeting, published on Thursday, showed a growing reticence about further increases in the central bank's $2.9 trillion balance sheet, which it expanded sharply in response to the financial crisis and recession of 2007-2009.
"Several (officials) thought that it would probably be appropriate to slow or to stop purchases well before the end of 2013, citing concerns about financial stability or the size of the balance sheet," the minutes said, referring to the narrower group of voting Fed members.
Investors picked up on the report's hawkish tone, with stock prices drifting lower after the announcement, while the U.S. dollar extended gains against the euro. Yields on the 30-year Treasury bond hit 3.12 percent, their highest levels since May.
"The minutes of the Federal Reserve's December monetary policy meeting revealed a somewhat surprising level of concern among the ranks of central bankers regarding the long-term impact of the bank's asset purchase program, or quantitative easing," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington D.C.
Still, the Fed appeared likely to continue buying assets for the foreseeable future, having announced in December it was extending monthly purchases of $40 billion in mortgage securities and also buying $45 billion in Treasuries each month.
A few of the voting members on the central bank's policy-setting Federal Open Market Committee thought asset buying would be warranted until about the end of 2013. A few others highlighted the need for further large-scale stimulus but did not specify an amount or time frame.
Fed officials generally agreed that the labor market outlook was not likely to improve without further nudging from the monetary authorities.
QE "HEEBIE-JEEBIES"
The U.S. economy expanded a respectable 3.1 percent in the third quarter on an annualized basis, but growth is believed to have slowed sharply to barely above 1.0 percent in the last three months of the year.
Data on Thursday showed a solid gain of 215,000 new private sector jobs for December, while analysts polled by Reuters last week were looking for a rise of 150,000 new jobs in the Labor Department's official survey, due out on Friday.
Still, the minutes indicated worries about quantitative easing policies were spreading beyond the usual regional Fed hawks who, like Richmond Fed President Jeffrey Lacker, have opposed additional Fed easing.
"What's clear from these minutes is that there is little consensus among the members of the FOMC on how long asset purchases should carry on," said Jason Conibear, trading director at Cambridge Mercantile.
"Some members want more accommodation for as long as it takes, some want more but to start winding it down while others have got the heebie-jeebies about the size of the balance sheet."
In the December meeting, the Fed also launched a new framework of policy thresholds, numerical guideposts that are supposed to give markets and the public a clearer idea of how policymakers will react to incoming economic data.
Officials say they will keep interest rates near zero until the unemployment rate falls to 6.5 percent for as long as estimates of medium-run inflation do not exceed 2.5 percent.
The minutes suggested it took officials some time to build a consensus around the idea.
"A few participants expressed a preference for using a qualitative description of the economic indicators influencing the Committee's thinking," the minutes said.
U.S. unemployment has come down steadily after hitting a peak of 10 percent in late 2009, but remains elevated at 7.7 percent.
Fed officials noted worries about the looming "fiscal cliff," which was dealt with only partly in an agreement earlier this week, were hurting the confidence of businesses and households.

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Stocks fade after Fed discloses split on stimulus

A two-day rally in the stock market came to an end Thursday afternoon when an account of the Federal Reserve's last meeting revealed a split between bank officials over how long the Fed should keep buying bonds to support the economy.
The Dow Jones industrial average and the Standard & Poor's 500 index treaded water for much of the day, then slid into the red around 2 p.m. Eastern, after the Fed released the minutes from its December meeting.
The Dow ended with a loss of 21.19 points at 13,391.36.
The S&P 500 lost 3.05 points to 1,459.37 and the Nasdaq composite fell 11.70 to 3,100.57.
At last month's meeting of the Federal Reserve's policy-making committee, the central bank pledged to buy $85 billion of Treasurys and mortgage-backed bonds and also keep a benchmark interest rate near zero until the unemployment rates drops below 6.5 percent.
On Thursday, the minutes from that meeting showed Fed officials were divided over the bond purchases. Some of its 12 voting members thought they should continue through this year, while another group thought they should be slowed or stopped much earlier. Just "a few" members saw no need for a time frame, according to the minutes.
"It's pretty surprising," said Thomas Simons, market economist at the investment bank Jefferies. "I think everybody thought there was broad agreement on policy, but now it seems like few of them really wanted to vote for it."
The stock market opened on a weak note after retailers reported mixed holiday sales and as the prospect of a new budget battle in Congress loomed. UnitedHealth Group led the Dow lower. The insurance giant's stock fell $2.55 to $51.99 after analysts at Deutsche Bank and other firms cut their ratings on the stock.
"It's natural to relax a bit after such a huge day as yesterday," said Lawrence Creatura, who manages a small-company fund at Federated Investors.
The Dow soared 308 points Wednesday, its largest point gain since December 2011. The rally was ignited after lawmakers passed a bill to avoid a combination of government spending cuts and tax increases called the "fiscal cliff."
That deal gave the market a jump start into the new year. The Dow and the S&P 500 are already up more than 2 percent.
"We're off to a very strong start," Creatura said. "The dominant reason is the resolution of the fiscal cliff. But January is usually a strong month, as investors all shift money into the market at the same time. When the calendar flips, it's as if you're allowed to begin the race anew."
Economists had warned that the full force of the fiscal cliff could drag the country into a recession. The law passed late Tuesday night averted that outcome for now, but other fiscal squabbles are likely in the months ahead. Congress must raise the government's borrowing limit soon or be forced to choose between slashing spending and paying its debts.
In other Thursday trading, prices of U.S. government bonds fell, sending their yields higher. The yield on the benchmark 10-year Treasury note rose to 1.90 percent from 1.84 percent late Wednesday, a sign that some bond traders believe the Fed minutes hinted at an early end to its bond buying.
Family Dollar Stores sank 13 percent after reporting earnings that fell short of analysts' projections. The company also forecast a weaker outlook for the current period and full year. Family Dollar's stock lost $8.30 to $55.74.
Nordstom Inc. surged 3 percent after the department-store chain reported strong holiday sales, especially in the South and Midwest. Nordstrom's stock was up $1.64 to $55.27.
Among other stocks making big moves:
— Transocean jumped $2.96 to $49.20. The owner of the oil rig that sank in the Gulf of Mexico in 2010 after an explosion killed 11 workers reached a $1.4 billion settlement with the Justice Department.
— Hormel Foods, known for making Spam and other meat products, said that it's buying Skippy, the country's No. 2 peanut butter brand, from Unilever for about $700 million. Hormel's stock jumped $1.19 to $33.20.

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How the Dow Jones industrial average fared

A two-day rally in the stock market came to an end Thursday afternoon when an account of the Federal Reserve's last meeting revealed a split between bank officials over how long the Fed should keep buying bonds to support the economy.
The Dow Jones industrial average lost 21.19, or 0.2 percent, to 13,391.36.
The Standard & Poor's 500 index lost 3.05, or 0.2 percent, to 1,459.37.
The Nasdaq composite index lost 11.70, or 0.4 percent, to 3,100.57.
For the week:
The Dow is up 453.25, or 3.5 percent.
The S&P 500 is up 56.94, or 4.1 percent.
The Nasdaq is up 140.26, or 4.7 percent.
For the year:
The Dow is up 287.22, or 2.2 percent.
The S&P 500 is up 33.18, or 2.3 percent.
The Nasdaq is up 81.06, or 2.7 percent.

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Data-feed glitch leaves some traders in dark on Nasdaq prices

NEW YORK (Reuters) - A technical glitch caused an outage of around 15 minutes on real-time prices for Nasdaq listed stocks, including Apple Inc and Google Inc , for many investors on Thursday, traders and multiple industry sources said.
Nasdaq said at 1:42 p.m. in an alert to traders that it was investigating an issue involving the Universal Trading Platform's (UTP) centralized securities information processor (SIP) data feeds, which consolidate and display market data for Nasdaq-listed securities from all trading venues.
Shortly after, Direct Edge, the No. 4 U.S. equities exchange, said it had halted trading in all Nasdaq order books. It said about 10 minutes later that all trading had resumed.
U.S. exchanges and alternative trading systems use UTP to quote and trade Nasdaq stocks. Those that do so must provide their data to the SIP for data consolidation and dissemination to traders that subscribe to the data feed.
The outage meant that continuous quotations and continuous last sale information from all market centers trading Nasdaq-listed securities was unavailable to as many as 2.5 million traders, said Eric Hunsader, founder of trading software and technology firm Nanex.
NYSE-listed securities, which are on a different data feed, were unaffected.
Hunsader said the reason behind consolidated feeds was to make market data affordable to the average investor.
Traders can also subscribe to direct data feeds from exchanges, rather than relying on the consolidated feeds. The direct feeds were unaffected by the UTP outage.
"This is a great example of the two-tiered market that we have developed," said Joe Saluzzi, co-head of trading at Themis Trading.
"There are the 'haves,' who subscribe to all of the private data feeds and various hardware and software and spend a ton of money, and then there are the 'have-nots,' which are the public who rely on the SIP," he said.
Data on quotes from the UTP SIP were stopped showing from 13:37.24 to 13:48.19, and data on trades were out from 13:36.55 to 13:51.14, said Hunsader, who maintains a blog where he posts frequently on sudden, computer-driven moves in markets.
A Nasdaq spokesman declined to comment. Spokesmen for Direct Edge and NYSE Euronext had no comment, and a spokesman for BATS Global Markets, the No. 3 U.S. equities exchange, was not immediately available.
In September, Big Board operator NYSE said it would pay $5 million to settle with the U.S. Securities and Exchange Commission after software issues and compliance failures allegedly led to some of the exchange's customers receiving access to market data faster others.
The SEC said at the time that early access to market data can lead to "a real and substantial advantage."
An SEC spokeswoman declined to comment on the UTP issue on Thursday.

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On cusp of new year, Chavez's health keeps Venezuleans fixated on future

Dec. 31 is typically a time to recap the biggest events of the year. But in Venezuela this year, news that President Hugo Chavez has suffered “new complications” after surgery on Dec. 11 has kept Venezuelans anxiously fixated on what’s to come in 2013.
In downtown Caracas, an annual free concert in Plaza Bolivar to welcome the New Year has been canceled, government officials said. They instead called on Venezuelans to unite in prayer for the prompt recuperation of President Chavez, according to the Venezuelan daily El Universal.
President Chavez underwent surgery in Cuba on Dec. 11 for a recurrence of cancer. Since then, the nation has been faced with uncertainty about his chances for recovery, whether he’ll be able to attend his Jan. 10 inauguration – after winning a fourth presidential election in October – and if not, who will be Venezuela’s new president.
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That uncertainty increased a notch after Venezuelan Vice President Nicolas Maduro went on television to say the following (translated into English by VenezuelanAnalysis): “Nineteen days after having undergone his surgical intervention, President Chavez’s state of health continues to be delicate; he has presented complications that are being attended to with treatment that is not without risk.”
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Venezuela is, of course, not alone in looking at what lies ahead in 2013. US President Barack Obama and US Congress are scrambling to avoid the so-called “fiscal cliff,” as they try to hammer out an agreement on taxes for the wealthy and budget cuts. And across the world, as the Monitor wrote in a round-up, nations are hoping that in 2013 they can bridge such political divides, some of them deadly. Venezuela, in hoping for more unity, was included on that list. But for now it is a nation holding its breath.
David Smilde, a guest blogger for the Monitor, told the Associated Press that the fact that Nicolas Maduro, the nation’s vice president, traveled to Cuba to personally meet with the president in recent days is itself telling. “The situation does not look good. The fact that Maduro himself would go to Cuba, leaving Hector Navarro in charge, only seems understandable if Chavez’s health is precarious,” said Mr. Smilde, who runs a blog on Venezuela for the Washington Office on Latin America.
The trip likely gave Mr. Maduro a chance “to be able to talk to Chavez himself and perhaps to talk to the Castros and other Cuban advisers about how to navigate the possibility of Chavez not being able to be sworn in on Jan. 10,” Mr. Smilde said. “Mentioning twice in his nationally televised speech that Chavez has suffered new complications only reinforces the appearance that the situation is serious.”
If Chavez does not recover, there are many questions about what is next for the oil-rich, Andean nation that has been dominated by Chavez since he took office in 1999.
According to the Venezuelan constitution, translated into English by the BBC, here is what should happen:
Article 231: The president-elect shall take office on January 10 of the first year of their constitutional term, by taking an oath before the National Assembly. If for any reason, (they) cannot be sworn in before the National Assembly, they shall take the oath of office before the Supreme Court.
Article 233: (...) When an elected President becomes absolutely absent prior to inauguration, a new election...shall be held within 30 days.
Article 234: When the President is temporarily unable to serve, they shall be replaced by the Executive Vice-President for a period of up to 90 days, which may be extended by resolution of the National Assembly for an additional 90 days.
But recently, a Chavez ally and head of the national assembly, Diosdado Cabello, said that the inauguration should be delayed – a move that the opposition has declared unconstitutional and casting doubt on what will happen. In the meantime, all of the problems that face Venezuela are on hold, as another guest blogger for Caracas Chronicles describes in his own personal experience here.
Chavez and his government, however, are trying to maintain a semblance of order – with Maduro sending out New Year’s greetings and avoiding mention of the radical changes that could await the nation in the year to come.
“Commander Chavez wanted us to transmit a special end of year greeting to Venezuelan families, who are gathered together over this period throughout the country; in particular he wanted to send a warm embrace to the children of Venezuela, and remind them that they are always in his heart," he said. "The embrace was extended to all of our people, so that they see in the year 2013 with love; a year which should bring the greatest of happiness to our homeland, as well as the definitive consolidation of our independence and national unity.

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Egypt's opposition still hopeful, despite many defeats

When a controversial constitutional draft went to a vote earlier this month, the Egyptian opposition was, as usual, in disarray.
It waffled for weeks between boycotting the referendum and calling for a no vote. When it finally chose the latter only days before the first round of voting on Dec. 15, it was too late to overcome the Muslim Brotherhood and their salafist allies’ strong campaign for a "yes."
But the backlash facing President Mohamed Morsi and the Muslim Brotherhood for rushing the constitution through without input from the opposition has given his opponents new hope for electoral success.
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“The divisions are a thing of the past now and we have Mr. Morsi to thank for that,” says Mostafa El Guindi, who was an independent member of the now-dissolved parliament and played a role in organizing the main facets of the opposition into a new coalition, the National Salvation Front.
“The marriage between ElBaradei and Hamdeen Sabahi is now fact,” he says, referring to two politicians with often clashing policies. That the Nobel prize winner and former head of the International Atomic Energy Agency, Mohammed ElBaradei, and Hamdeen Sabahi, the leftist candidate who came in a surprising third in June’s presidential elections, have come together shows the strength of the determination to create a united front against the Brothers.
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This gives the opposition new hope heading towards parliamentary elections which, according to Egyptian law, must happen within two months of the approval of the constitution.
REJECTING POLITICAL GAMES
But there are also those who say the opposition has only itself to blame for its failure to chip away at the electoral successes of the Muslim Brotherhood.
“Many people wanted to vote no in the referendum about the constitution, but they were looking for a good reason to do so,” says Fady Ramzy, who runs the think tank Messry. “The problem is that the opposition doesn’t have a political product to sell. They should have spent their time convincing people that this constitution is [a waste] for any number of reasons, and that we should do a better job. Because what we have now is just a bunch of nice words with no mechanism to hold those in power to the promises contained in the constitution. Instead, the opposition chose to make a lot of noise about the influence of sharia in the new constitution.”
Mr. Ramzy’s assertion was echoed by voters in some of the districts in the Nile Delta last week. Most Egyptians voting "yes" cited a desire for stability as their main reason, while most "no" voters had very specific reasons to be against the constitution. Among them were the absence of a minimum wage in Egypt –wages are instead linked to productivity – or the fact that free health care is subject to a "certificate of poverty," which many see as humiliating.
Not a single voter cited the role of sharia, or Islamic law, as a reason to vote either for or against the document, despite the fact that both sides had campaigned mainly on this issue.
“The religious factor is decreasing with every election,” says Ramzy. “People realize that political games are being played with religion, and they are starting to refuse being put before the choice of voting for or against Islam.”
DISILLUSIONED BY DEMOCRACY'S SLOW PACE
There is also a growing belief that Egypt’s chaotic path since the overthrow of Mubarak in February 2011 was perhaps an inevitable one.
For all the criticism of the opposition, “it is unreasonable to expect Egypt to have a healthy political landscape just two years after the fall of a dictatorship,” political activist Alfred Raouf says.
“We need at least five years to get to that point, especially with a Muslim Brotherhood that is not really intent on having a diverse political landscape, but rather wants to take the place of the NDP,” he says, referring to Mubarak's former National Democratic Party.
Writing in the Egypt Independent this week, Mr. Raouf said that even if the revolutionaries had been the ones to assume power, they would have "quickly oppressed the people." What happened instead – military rule followed by a landslide for the Muslim Brotherhood – “seems to most people like a catastrophic outcome to a very hopeful revolution," but is actually "the best course for the revolution,” Raouf wrote.
Nevertheless, Raouf, a founding member of ElBaradei’s Dostour (Constitution) party, sees an opportunity for the opposition to make inroads in the next parliamentary elections, even if the current opposition coalition dissolves before then.
Mostafa El Guindi believes the opposition has a chance to win a majority in parliament. But Raouf is more conservative. “I think we have a good chance of getting 45 percent of the seats in parliament, up from around 30 percent, provided there is no rigging,” he says.
What worries him most is voter turnout, which is lower with every election or referendum.
“It suggests that people no longer believe in democracy because they don’t see it helping them in their daily lives.

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