US stock rally fades as investors assess Fed moves
Investors doused a two-week-old stock rally Thursday as concerns emerged that the Federal Reserve’s new bond-buying campaign could wind up hurting the dollar and causing inflation.
Banking and other financial shares pulled the market lower, but energy stocks got a boost from soaring crude oil prices.
The retreat came a day after stocks surged in reaction to the Fed’s aggressive plans to pump more than $1 trillion into the financial system by buying Treasury bonds and stepping up its purchases of other debt securities. The aim is to lower borrowing rates and stimulate lending.
On Thursday, investors began to digest the possible downsides of the Fed’s program such as a potentially weaker dollar. That can lead to higher prices for commodities such as oil and grains, and eventually everyday products like gas and food.
« After the initial euphoria surrounding the surprise announcement yesterday, there’s a little more analysis of this going on and its leading to some questions, » said Todd Salamone, senior vice president of research at Schaeffer’s Investment Research.