U.S. stocks edge lower as attention shifts to repo operations.
The U.S. stock market declined on Friday, as investors evaluated the Federal Reserve’s latest efforts to shore up liquidity through overnight liquidity operations.
All of Wall Street’s major indices finished in negative territory. The Dow Jones Industrial Average (NYSEARCA:DIA) fell 159.73 points, or 0.6%, to close at 26,935.07.
The broad S&P 500 Index (NYSEARCA:SPY) fell 0.5% to 2,992.07. Shares of information technology, consumer discretionary and communication services companies led the declines. On the opposite side of the ledger, health care and utilities outperformed the large-cap index.
Meanwhile, the technology-focused Nasdaq Composite Index (NYSEARCA:QQQ) settled down 0.8% at 8,117.67.
A measure of implied volatility known as the CBOE VIX (NYSEARCA:VXX) surged on Friday, as instability returned to Wall Street. The so-called “fear index” climbed 11% to 15.84 on a scale of 1-100 where 20 represents the historic average. It would eventually settle at 15.02, having gained 6.9%.
The Federal Reserve conducted another repo operation on Friday, boosting financial-market liquidity by $75 billion in an effort to keep short-term interest rates from skyrocketing. Over the past four days, the U.S. central bank has injected more than $275 billion into the markets.
Officials at the New York Federal Reserve will continue their overnight repurchase operations through mid-October. The process includes three 14-day interventions involving $30 billion, as well as continued overnight purchases of at least $75 billion.
The Final Word: This week marked the Fed’s first repo operation since the financial crisis. With the Fed firing up the printing press, investors are growing ever weary of ultra-loose monetary policy.