Dow Jones Industrial Average Falls After Yellen's First FOMC Meeting

The markets crumbled today after the Federal Open Market Committee (FOMC) indicated a dovish approach to economic policy. At the closing bell, the Dow Jones Industrial Average fell 114 points to finish at 16,222. The Nasdaq slumped 25 points to finish at 4307, while the S&P 500 lost 11 points to close at 1860.

The FOMC moved the goal posts on Wednesday, altering its view of when the central bank should raise interest rates. At its first meeting with new Chair Janet Yellen at the helm, the committee elected to trim its asset-purchasing program (quantitative easing) by another $10 billion to $55 billion per month.

The bigger story was the FOMC's decision to alter language on when the Fed would start to consider an increase in interest rates once U.S. employment reaches 6.5%. The new language provides the central bank greater discretion in the timeline for when a rate increase occurs, regardless of the national unemployment rate, which sits today at 6.5%.

Besides the Fed, here's what else pushed the Dow lower today:

  1. Another Day, Another Prosecution: As we expected, another banker has been busted for bad behavior today. Reuters reports that U.S. prosecutors have charged a Morgan Stanley (NYSE: MS) stockbroker and a lawyer at New York firm Simpson Thacher & Bartlett with insider trading that led to $5.6 million in illegal gains. Charges state that the lawyer would pass on insider tips on at least a dozen pending mergers and acquisitions to the stockbroker on napkins and Post-It notes, which the Morgan Stanley trader would then chew and even swallow after memorizing the companies involved. Shares of Morgan Stanley were still up on the day. But there's another bank that is poised to go down in the near future, as Shah Gilani reports.
  2. General Motors on Watch: The U.S. Justice Department officially announced that Toyota Motor Corp (NYSE: TM) will pay a record $1.2 billion to settle a criminal investigation into its failure to properly resolve safety issues with its vehicles. It is widely expected that a similar investigation and even greater settlement are set for General Motors Co. (NYSE: GM). Toyota's probe dates back to 2007, and its failure to address unexpected acceleration in certain vehicles has been tied to at least five deaths. Toyota shares were down marginally on the news. Here's what the settlement means to investors moving forward.
  3. Shipping Blues Under White Clouds: This morning, FedEx Corp. (NYSE: FDX) missed market estimates before the bell, reporting third-quarter earnings of $11.3 billion, a slight increase from last year's Q3 revenues of $11 billion. The company blamed the surge of winter weather across the United States for costing the company about $125 million in operating income. As a result, the company reduced its 2014 earnings outlook. Still, it is looking for an uptick in sales as spring approaches.
  4. Outraged Man Changes Outrageous Demands: As we've reported on several occasions, activist investor Carl Icahn is hell bent on having eBay Inc. (Nasdaq: EBAY) spin off its PayPal business in an initial public offering. Now, he is lowering his demands and requesting a sale of 20% of its stake in PayPal through a public offering. Icahn has been engaged in a nasty public battle with company directors and has gone as far as to argue that board members are actively working against the company's financial interest. Icahn believes the PayPal unit is undervalued, while analysts at Stifel Equity Trading Desk warn that a spin-off would remove a key support for share prices in the online retail and auctioning company.
  5. Cable Merger on Hold: Reuters reports that Florida officials plan to join several other states and the U.S. Justice Department in a probe over Comcast Corp.'s (Nasdaq: CMCSA) planned merger with Time Warner Cable (NYSE: TWC). The states aim to determine whether the planned merger would violate U.S. antitrust laws. Despite the likelihood of the probe, we said last week that the deal was inevitable, including a mention of investment opportunities ahead.

Today's Quick Hits

  • POLITICO reports that a U.S. Internal Revenue Service employee was able to take home sensitive data on 20,000 Americans in 2007. An investigation is currently underway.
  • Despite being a champion of increased taxes on the rich, Warren Buffett increased Berkshire Hathaway's ability to limit taxes on more than $1 billion in gains in Graham Holdings Company, according to Bloomberg.
  • The federal government has prepared to regulate Bitcoin and other digital currencies as their use becomes more widespread, according to multiple reports quoting Treasury Undersecretary for Terrorism and Financial Intelligence David Cohen.
  • According to a survey by the Employee Benefits Research Institute (EBRI), 36% of current American workers admit they have saved $1,000 or less for their retirement.
  • U.S. President Barack Obama announced his picks for the annual March Madness NCAA tournament to ESPN on the same day that the Associated Press raised concerns about access to the President on pressing issues like foreign policy and lack of transparency over FOIA requests.

After reading this, you'll be laughing at investors who are worried about the next market sell-off. Start profiting today...

About the Author

Garrett Baldwin is a globally recognized research economist, financial writer, consultant, and political risk analyst with decades of trading experience and degrees in economics, cybersecurity, and business from Johns Hopkins, Purdue, Indiana University, and Northwestern.

Read full bio