Why the Dow Is Down Today
Blue-chip stocks are broadly lower this afternoon after the Bank of Japan announced that it would hold its economic stimulus steady amid a pickup in key business metrics. The move led some analysts and investors to conclude that the U.S. Federal Reserve could take things one step further by reducing its open-market purchases of bonds here at home. As of 2:45 P.M. EDT, the Dow Jones Industrial Average is off by 80 points, or 0.52%.
After committing itself to an aggressive policy of monetary easing, the Japanese central bank voted at its meeting this week to refrain from taking any new measures to spur the economy. Recent data suggests that its strategy to increase inflation to 2% is bearing fruit: The value of the yen has fallen relative to the dollar, exports have picked up, and the latest figures show that the Asian country's gross domestic product is expanding at a 4.1% annual pace.
While these economic figures were great news, they've nevertheless caused some people to wonder whether this is a harbinger of things to come here at home. Analysts have been speculating over the last month about whether the U.S. central bank will begin tapering its monthly purchases of $85 billion in Treasuries and mortgage-backed securities. The move would reduce the growth of liquidity in the market and potentially result in a deflation of asset prices.
"Central banks have pushed many assets beyond the fundamentals and created a great deal of volatility," a market strategist quoted by Reuters noted. "Nobody really has an idea where the unwinding stops."
In terms of individual stocks, Boeing is flat despite having predicted a brighter future for the aerospace industry. It announced today that the U.S. military has placed a $4 billion order for 177 Chinook helicopters. In addition, the company also raised its 20-year outlook for airplane demand to 35,280 aircraft worth $4.8 trillion. This represents a 3.8% increase over its prior forecast.
Alternatively, shares of Bank of America are down 0.9% despite positive comments from the bank's chief financial officer. Speaking at a banking conference today, CFO Bruce Thompson said the nation's second-largest lender by assets is continuing to regain ground in the mortgage market. It had previously relinquished its dominant position therein to retrench and deal with legacy issues related to the financial crisis. While its share of the market is currently around 4% -- for reference, Wells Fargo underwrites an estimated one in three domestic mortgages -- Thompson noted that he "expect(s) [it] to be in the 5 percent area as we exit the second quarter and look to continue to grow from that."
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