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Markets slumped to their fifth-straight day of losses after minutes from the Federal Reserve's June meeting revealed no additional economic measures were in the offing. The central bank would only consider further economic measures if there were more signs of the economy was weakening. However, an upward rally almost at the end of the trading session helped the markets to recover from their day’s lows. Industrial and technology sectors suffered heavy losses for the second consecutive day.

The Dow Jones Industrial Average (DJI) shed 0.4% and was down to 12,604.53. The Standard & Poor 500 (S&P 500) closed close to the levels it started the day at, slipping a negligible 0.01% to close at 1,341.45. The tech-laden Nasdaq Composite Index lost 0.5% and finished yesterday’s trading session at 2,887.98. The fear-gauge CBOE Volatility Index (VIX) dropped 4.1% and settled at 17.95. Consolidated volumes on the New York Stock Exchange, the Nasdaq and the American Stock Exchange were roughly 6.02 billion shares, lower than the year-to-date daily average of 6.85 billion. The advancing stocks edged past the decliners on the NYSE; as for 51% of advancers, 45% stocks ended lower.

The trading session was dominated by what the minutes from the Federal Open Market Committee’s meeting had to suggest. The meeting was held last month on the 19th and 20th at the offices of the Board of Governors of the Federal Reserve System in Washington, D.C., and the central bank was divided over the implementation of additional economic measures. “A few” policy makers were in support of further economic measures in the current scenario and the FOMC minutes noted: “A few members expressed the view that further policy stimulus likely would be necessary to promote satisfactory growth in employment and to ensure that the inflation rate would be at the Committee’s goal”.

However, “several” members opined otherwise and they believed that economic stimulus can be put on hold until the economy deteriorated further. According to the minutes: “Several others noted that additional policy action could be warranted if the economic recovery were to lose momentum, if the downside risks to the forecast became sufficiently pronounced, or if inflation seemed likely to run persistently below the Committee’s longer-run objective”.

Thus, the division within the FOMC was evident and investors’ hopes were dashed yet again. Investors have been hoping for a third round of quantitative easing ever since the second one ended last year. These hopes have been fuelled by various reasons at different phases. Lately these expectations were based on several weak economic readings both on the domestic and global front over the past several days.

Even the latest FOMC minutes acknowledged the sorry state of the economy. According to the minutes: “Growth in employment has slowed in recent months, and the unemployment rate remains elevated. Business fixed investment has continued to advance. Household spending appears to be rising at a somewhat slower pace than earlier in the year. Despite some signs of improvement, the housing sector remains depressed. Inflation has declined, mainly reflecting lower prices of crude oil and gasoline, and longer-term inflation expectations have remained stable”.

Nonetheless, as “several” policy makers wait for further signs of weakening, investors would have to wait longer. In fact, economists opined that the central bank might not come up with additional measures even in its next meeting, scheduled at the end of this month. They also believe that policy makers might wait and observe developments in the labor market and then decide about economic stimulus accordingly.

Industrials and technology stocks suffered sharp losses yesterday. The Industrial Select Sector SPDR (XLI) dropped 0.7%.  Cummins Inc. (NYSE:CMI), Deere & Company (NYSE:DE), Masco Corporation (NYSE:MAS) and The Boeing Company (NYSE:BA) lost 3.9%, 0.6%, 1.3% and 2.3%, respectively. As for the technology sector, the Technology Select Sector SPDR (XLK) dropped 0.5%. Among the decliners, SanDisk Corporation (NASDAQ:SNDK), Microsoft Corporation (NASDAQ:MSFT), Computer Sciences Corporation (NYSE:CSC) and Ciena Corporation (NASDAQ:CIEN) plunged 1.9%, 1.5%, 1.1% and 7.9%, respectively.

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