Wall Street on edge over talk of end to QE
US investors face another Washington-imposed deadline on government spending cuts this week, but the cut-off not generating the same level of fear as two months ago when the “fiscal cliff” loomed large.
Investors in sectors most likely to be affected by the cuts, like defence, seem untroubled that the budget talks could send stocks tumbling.
Talks on the US budget crisis began again last week leading up to the 1 March deadline for the so-called sequestration when $85bn (£56bn) in automatic federal spending cuts are scheduled to take effect.
Stocks rallied in early January after a compromise temporarily avoided the fiscal cliff, and the Standard & Poor’s 500 index has risen 6.3 per cent since the start of the year.
But the benchmark index lost steam last week, posting its first week of losses since the start of the year after Minutes on Wednesday from the last Federal Reserve meeting suggested the central bank may slow or stop its stimulus policy sooner than expected.
The latest data on fourth-quarter US gross domestic product is expected on Thursday, and some analysts predict an upward revision following trade data that showed America’s deficit shrank in December to its narrowest in nearly three years.
US GDP unexpectedly contracted in the fourth quarter, according to an earlier government estimate, but analysts said there was no reason for panic, given that consumer spending and business investment picked up.
Investors will be looking for any hints of changes in the Fed’s policy of monetary easing when Fed Chairman Ben Bernanke speaks before congressional committees tomorrow and on Wednesday.
Shares of Apple will be watched closely this week when the company’s annual stockholders’ meeting is held.