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Minutes from the Federal Reserve’s last meeting showed growing concern at the central bank about the severity of the pullback in the housing sector, according to an Associated Press report.
Though the minutes from the Fed’s Dec. 12 meeting said inflation continues to moderate, the bleak assessment of the housing market unnerved investors who were betting that the sector’s problems wouldn’t necessarily spill over into other portions of the economy.
Release of the minutes sapped strength out of the market on a day that earlier had seen triple-digit gains and a new trading high for the Dow Jones industrials.
“The concern is that the Fed was seeing something at their last meeting that suggested potentially more pronounced weakness than we had all been anticipating in the economy,” said Drew Matus, senior economist at Lehman Brothers Inc.
Matus contends the pullback in the markets was overblown given recent data.
“It doesn’t make a lot of sense to react to something that is three weeks old and doesn’t incorporate the data that we got between now and then. The manufacturing data today suggests things were going OK as we headed into the end of the year.”