MARKET REPORT

Fed split puts damper on stocks

— 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 1 p.m., 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 11.69 to 3,100.57.

Rising stocks outnumbered falling ones on the New York Stock Exchange. Consolidated volume was 3.7 billion shares, above the recent average.

At last month’s meeting of the Federal Reserve’s policymaking committee, the central bank pledged to buy $85 billion of Treasurys and mortgage-backed bonds, and keep a benchmark interest rate near zero until the unemployment rates drops below 6.5 percent.

On Thursday, the minutes from that meeting showed that 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.

“It’s natural to relax a bit after such a huge day as [Wednesday],” 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.

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.

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 that 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 fell $8.30 to close at $55.74.

Nordstom Inc. stock surged 3 percent after the department-store chain reported strong holiday sales, especially in the South and Midwest. Nordstrom’s stock rose $1.64 to $55.27.

Business, Pages 24 on 01/04/2013

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