Updated from 4:17 p.m. ET with Fifth Third's settlement of the SEC's accounting investigation.
The broad indexes ended mixed, as investors seemed once again to focus on Federal Reserve policy, in light of recent comments by several Federal Reserve Bank presidents and the upcoming release on Thursday of the estimated U.S. gross domestic product growth from the Bureau of Economic Analysis.
The KBW Bank Index (I:BKX) was down slightly to 64.26, with 14 of the 24 index components ending with declines.The market yield on 10-year U.S. Treasury bonds rose four basis points to 2.67% on Tuesday, mirroring the movement of the 10-year heading into the Federal Open Market Committee (FOMC) meeting in September. Prior to that meeting, the yield on the 10-year rose to nearly 3.00%, as investors anticipated a decision by the committee to begin reducing the central bank's monthly bond purchases. The Federal Reserve has been purchasing a net $45 billion in long-term U.S. Treasury securities and $40 billion in long-term agency mortgage-backed securities each month since September 2012, in an effort to hold down long-term interest rates. The FOMC following its October 29-30 meeting once again made no change in the bond-purchasing volume. Federal Reserve Bank of Boston president Eric Rosengren in a speech on Monday tried to make it clear to the market that the Fed's eventual "tapering" of bond purchases will actually be a good thing, since the decision will depend on data indicating "improvement in real GDP growth... along with inflation moving towards the 2 percent inflation target." "I would emphasize that when the Fed chooses to do so, we will not be restraining the economy - in fact, we will still be adding stimulus to the economy but in smaller increments than before," Rosengren said. The most recent estimate for the second-quarter U.S. GDP growth rate was 2.5%, and the unemployment rate improved to 7.2% in September from 7.3% in August. Rosengren painted a rather bleak picture of the ongoing economic recovery saying that "At a growth rate of 2.8 percent, we do not attain 5.25% unemployment until the end of 2018."
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