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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:
- 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.
- 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.
About the Author
Garrett Baldwin is a globally recognized research economist, financial writer, and consultant with degrees from Northwestern, Johns Hopkins, Purdue, and Indiana University. He is a seasoned financial and political risk analyst, with a focus on stocks, hedge funds, private equity, blockchain, and housing policy. He has conducted risk assessment projects for clients in 27 countries, and consulted on policy and financial operations for some of the nation's largest financial institutions, including a $1.5 trillion credit fund, a $43 billion credit and auto loan giant, as well as two of the largest Wall Street banks by assets under management.
Garrett joined Money Map Press as an economist and researcher in 2011, specializing in alternative strategies with an emphasis on fundamental and technical analysis.