The US markets ended considerably lower on Wednesday, in a volatile session, following the release of the minutes of the latest Federal Reserve meeting. With the late-day sell-off, the major averages extended the notable drop seen in the previous session. The Fed minutes revealed most officials at the central bank's July monetary policy meeting believe it will be appropriate to begin tapering asset purchases this year. The expectation of tapering asset purchases this year comes as most participants saw the ‘substantial further progress’ criterion as satisfied with respect to the price stability goal and as close to being satisfied with respect to maximum employment. However, the minutes of the July 27 to 28 meeting showed there was still some disagreement over the timing of tapering the asset purchases. Participants favoring waiting until next year saw prevailing conditions in the labor market as not being close to meeting the ‘substantial further progress’ standard or because of uncertainty about the degree of progress toward the price stability goal.
The Fed has repeatedly pledged to maintain its asset purchases at current levels until ‘substantial further progress’ has been made toward both its maximum employment and price stability goals. The minutes showed participants also expressed a range of views on the appropriate pace of tapering asset purchases once economic conditions satisfied the 'substantial further progress' criterion. Reflecting the recent surge in new cases of the delta variant of the coronavirus, several participants noted their views on the appropriate path of asset purchases could change if the economic effects of the new strains of the virus turn out to be notably worse than anticipated. With the Fed pledging to provide advance notice before making changes to its asset purchase program, traders are likely to pay close attention to the statement following the next monetary policy meeting in September.
Dow Jones Industrial Average dropped 382.59 points or 1.08 percent to 34,960.69, Nasdaq fell 130.27 points or 0.89 percent to 14,525.91 and S&P 500 was down by 47.81 points or 1.07 percent to 4,400.27.