U.S. stocks fall on U.S. budget deal; Dow drops 0.81%

Investing.com - U.S. stocks dropped on Wednesday after lawmakers agreed on a way out of a budget impasse, which left investors concluding the Federal Reserve is now more likely to begin tapering its USD85 billion in monthly bond purchases.

Fed asset purchases drive down interest rates to spur recovery, boosting stock prices in the process, and talk of their dismantling can dampen stock prices by fanning uncertainty as to how equities will perform without a monetary crutch.

At the close of U.S. trading, the Dow Jones Industrial Average fell 0.81%, the S&P 500 index fell 1.13%, while the Nasdaq Composite index fell 1.40%.

Congressional Democrats and Republicans agreed on a deal setting a 2014 budget at USD1.012 trillion, and a 2015 budget at USD1.014 trillion in a fiscal compromise that would reduce automatic spending cuts and deficit levels by USD23 billion over two years.

The deal left investors betting that the U.S. central bank is closer to tapering the pace of its monthly asset purchases bet it next week or in a couple of months, which will take away some of the monetary support the Fed has give stock markets for over a year.

Leading Dow Jones Industrial Average performers included Visa, up 3.09%, Coca-Cola, up 0.66%, and Home Depot, up 0.46%.

The Dow Jones Industrial Average's worst performers included Nike, down 3.05%, UnitedHealth Group, down 2.67%, and Pfizer, down 2.25%.

European indices, meanwhile, finished lower.

After the close of European trade, the EURO STOXX 50 fell 0.47%, France's CAC 40 fell 0.10%, while Germany's DAX 30 fell 0.41%. Meanwhile, in the U.K. the FTSE 100 finished down 0.24%.

On Thursday, the U.S. is to produce data on retail sales as well as the weekly report on initial jobless claims.

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