The news offset earlier gains prompted by a strong retail sales report suggesting the government shutdown pressured consumers less than expected. The Dow Jones Industrial Average dropped 0.41% to 15,900.82 while the S&P 500 was off 0.36% to 1,781.37. The Nasdaq slid 0.26% to 3,921.27.
"Will it happen sooner rather than later? Yea, it will happen sooner," Ron Florance, deputy chief investment officer for investment strategy at Wells Fargo Private Bank, said in a phone interview, referring to the FOMC minutes. Florance said that the drop in markets likely was a reaction by investors to take profits off the table.
U.S. consumers appeared unaffected by the partial government shutdown during October, boosting U.S. retail sales by the most in four months. Retail sales rose 0.4% from a flat reading in September, the Commerce Department said on Wednesday. A sharp drop in gas prices was a slight dampener on the result. The Consumer Price Index contracted in October for the first time in six months, falling 0.1% from a prior reading of 0.2%. Economists were expecting no change.
The European Central Bank is reported to be considering a smaller-than-usual cut in the deposit rate if it is moved to negative territory for the first time, according to Bloomberg. The rate for commercial lenders who invest excess cash with the ECB would be negative 0.1 percent down from zero, according to reports. U.S. businesses also increased their inventories by the largest amount in eight months during September, with a modest rise in sales. Inventories rose 0.6 percent in September while sales rose 0.2 percent, the Commerce Department said Wednesday. On the flip-side, October existing home sales fell 3.2% month-over-month to an annualized pace of 5.12 million units. This was worse than expectations for a 2.9% result and the second straight monthly decline. It compared to a 1.9% fall in September to 5.29 million units. In company news, J.C. Penney ( JCP) posted a larger-than-expected quarterly loss Wednesday but said sales would likely continue to improve during the current quarter. The retailer lost $489 million or $1.94 per share in the third quarter while lower revenue of $2.78 billion was roughly in line with expectations. Analysts had expected a loss of $1.71 per share. Company shares jumped 8.4% to $9.44. Deere ( DE), the manufacturer of farm equipment, posted fourth-quarter net income that was 17 percent higher after raising prices. The company earned $806.8 million or $2.11 per share up from $687.6 million or $1.75 per share a year earlier. Results beat estimates of $1.90 per share profit. Deere shares closed up 2.1% to $84.52 on Wednesday.
JPMorgan Chase ( JPM) slipped 0.09% to $56.10. New York State Attorney General Eric Schneiderman on Tuesday announced the $13 billion mortgage settlement between JPMorgan Chaseand multiple government authorities. "Today's settlement is a significant, but by no means final step, by the Federal Housing Finance Agency's Office of the Inspector General, the Department of Justice and the New York Attorney General's Office and our other law enforcement partners, to hold accountable those who commit acts of fraud and deceit," Schneiderman said in a press release.
Yahoo! ( YHOO) tacked on 2.9% to $35.62. The Internet company announced Tuesday that it will raise its buyback offering by $5 billion, and issue $1 billion in convertible debt. Yahoo! has spent $3.1 billion on share buybacks in the first nine months of 2013, according to Reuters. Fed Chairman Ben Bernanke said in Washington Tuesday night that the Fed plans to keep its benchmark interest rate near zero for some time to come and plans to dial back its massive bond buying program only after strong evidence of restored health to the job market. "I agree with the sentiment, expressed by my colleague Janet Yellen at her testimony last week, that the surest path to a more normal approach to monetary policy is to do all we can today to promote a more robust recovery," said Bernanke. New York Federal Reserve Bank President William Dudley said that despite fiscal challenges, the U.S. economic recovery was set to pick up. "The private sector of the economy has largely completed its healing process and is now poised to ramp up its level of activity," Dudley told a press briefing on Wednesday. He noted the October employment report showed a rise in job gains, with third quarter growth hitting 2.8%.
St. Louis Federal Red Bank President James Bullard is expected to give an interview on the economy and monetary policy in Chicago at 12:10 p.m. The FTSE in London lost 0.25% and the DAX in Germany gained 0.09%. Hong Kong's Hang Seng finished up 0.18% while the Nikkei 225 in Japan fell 0.33%. The 10-year Treasury was plunging 23/32, boosting the yield to 2.792%, while the U.S. dollar index was jumping 0.63% to $81.05. -- By Jane Searle and Joe Deaux in New York