No QE Just Yet, Fed Minutes Suggest

Let's wait and see on QE3. That was the market's read of the Federal Reserve's Federal Open Market Committee (FOMC) minutes released this afternoon, creating a swift and negative investor response. The Dow Jones Industrial Average moved 100 points lower intraday on the announcement, and stocks appeared poised to post a fifth-straight day of declines. The index saw a slight recovery, finishing the day down 48 points. The S&P 500 tested trendline support from the June lows at 1335 - as well as its falling 50-day moving average - in Wednesday's trading session, closing at 1341. The minutes reflected increased worries about Europe and weaker-than-expected U.S. and global economic data, among other concerns. Still, there was no strong consensus on the need for additional securities purchases. The broad consensus among the 12 Federal Reserve Bank heads was that the economy continues to expand; growth could remain "moderate" in coming quarters, then pick up gradually. A few members suggested that further stimulus was needed to stabilize inflation and promote full employment, according to the minutes. Yet several others noted that additional action "could be warranted" if the economy were to lose momentum or if downside risks were clearer. The next FOMC meeting is scheduled for July 31 through August 1, followed by another two-day meeting September 12 and 13. Another round of quantitative easing remains the not-so-secret hope of many investors who figure that it would stimulate equities, the gold market, and other asset classes that rallied strongly in the past two rounds of stimulus. Expectations had risen for QE3 after a trio of Fed governors voiced support for additional Fed action on Monday. They joined the ranks of Vice Chair Janet Yellen, who had spoken out in favor of further easing prior to the Fed's meeting on June 19 and 20. For the time being, however, those expectations are on hold.