US equities ended lower despite hitting its highest level since May 2008 earlier in the day. Stocks eventually dropped after the Fed announced that adding stimulus to the economy may not remedy current economic problems. The Dow Jones Industrial Average index surrendered 68.06 points, or -0.51%, to close at 13,203.58, while the S&P500 index gave up 4.96 points, or -0.35%, to close at 1,413.17.
Atlanta Federal Reserve Bank President Dennis Lockhart has stated that it is not yet clear whether or not further monetary easing is necessary. He also added that there was a risk to monetary policy being too aggressively employed, and that they would have to very carefully weigh the costs and benefits.
Furthermore, he said, though monetary policy can positively influence an economy, it is still not a cure-all. To date, economic recovery still has seen weak growth and persistently high unemployment.
Reports from the Pro Farmer Midwest Crop Tour have recounted more crop damage than expected from the drought in the US. Disappointing reports from the crop tours in states such as Ohio and South Dakota have shown that it is improbable soybean yields will reach current government crop projections.
Though the crop tour didn’t estimate soybean yields, it reported an average of 584.9 pods per 3-foot-by-3-foot square area in South Dakota, down by 47% year-on-year, while scouts in Ohio reported soybean counts at an average of 1,033.72 pods per 3-foot-by-3-foot square area, down from 1,253.2 pods a year ago. While commodities traders had for a long time braced for the prospect of a crop devastated by drought, the estimates were much lower than many had expected.
US Treasury yields ended at their highest level in three months as the reports on the ECB buying sovereign debt increased investor confidence in riskier assets. The two-year note yield edged up 0.4 basis points to 0.287%, while the 10-year bond yield dipped slightly by 0.3bp to 1.802%.
The European equities market closed higher on the back of renewed hopes that the ECB would soon act to manage the sovereign debt crisis in the region. The FTSEurofirst300 index ascended 4.69 points, or +0.42%, to close at 1,109.55.
The euro soared as currency traders eagerly awaited for the ECB to act on the region’s debt woes. The shared currency picked up 1.27 cents, or +1.03%, to close at US$1.2476.