U.S. Stocks Fall With Gold, Treasuries on Fed Policy Statement

New York (Oct 30  The Standard & Poor’s 500 Index fell for the first time in five days and gold and Treasuries dropped, while the dollar rebounded from earlier declines, as the Federal Reserve fueled speculation it will begin to slow the pace of stimulus in coming months.

The S&P 500 slipped 0.5 percent to 1,763.79 at 3:08 p.m. after rising to a record yesterday for a third straight day. The 10-year Treasury yield increased two basis points to 2.53 percent after earlier dropping as much as three basis points. Gold futures fell 0.2 percent after climbing more than 1 percent earlier. The Bloomberg U.S. Dollar Index, a gauge of the currency against 10 major peers, reversed a 0.3 percent drop to rise 0.1 percent.

The Fed decided to press on with $85 billion in monthly bond purchases, saying it needs to see more evidence that the economy will continue to improve even amid signs of “underlying strength.” The Fed was expected to maintain the pace of asset purchases before beginning to reduce them at its March meeting, according to a Bloomberg survey of analysts.

“When you look at the reaction in the market, investors are really taking the opinion that the taper may actually come sooner than previously thought,” Chris Gaffney, senior market strategist at EverBank Wealth Management, said by phone from St. Louis. “The statement is pretty strong in its view that the Fed sees the economy continuing to improve. They did not mention the government shutdown. All indications are that the economy is going to continue to improve.” restraining economic growth.”

Fed Chairman Ben S. Bernanke is pushing unprecedented accommodation into the final months of his Fed chairmanship as he seeks to shield the four-year economic expansion from the impact of higher borrowing costs and this month’s partial U.S. government shutdown. The 16-day closing resulted in the furloughs of as many as 800,000 federal workers and delayed release of data the Fed says it needs to evaluate the economy.

“Taking into account the extent of federal fiscal retrenchment over the past year, the committee sees the improvement in economic activity and labor market conditions since it began its asset purchase program as consistent with growing underlying strength in the broader economy,” the Fed’s policy committee said.

It’s “imperative” that the Fed begin to taper its record stimulus because it is inflating asset prices too much, BlackRock Inc. Chief Executive Officer Laurence D. Fink, whose company is the world’s largest money manager with $4.1 trillion in assets, said during a panel discussion in Chicago yesterday.

“We’ve seen real bubble-like markets again,” he said. “We’ve had a huge increase in the equity market. We’ve seen corporate-debt spreads narrow dramatically.”

The S&P 500 has rallied 161 percent from its bear-market low in 2009. The extra yield investors demand to hold high-risk, high-yield bonds has dropped to 444 basis points from this year’s high of 534 in June, according to the Bank of America Merrill Lynch U.S. High Yield Index. That spread reached 440 basis points on Oct. 24, the narrowest since May 28.

Energy, consumer-staples and telephone companies led losses in all 10 of the main industry groups in the S&P 500 today. Yelp Inc., owner of a website that lets consumers review local businesses, sank 5 percent after reporting a wider-than- estimated loss. General Motors Co. climbed 3.1 percent after third-quarter profit beat estimates as the largest U.S. automaker’s North American earnings helped buffer international losses.