Stocks fell after the Federal Reserve signaled that a decision on a reduction of its massive bond-buying program could happen in 2021. Treasuries and the dollar were little changed.

The S&P 500 extended losses into a second day after minutes of the Fed’s July gathering showed that most officials agreed they could start tapering this year as they had hit their inflation goal and were closer to reaching their standard for progress on reducing unemployment.

“The minutes reflect a Fed that is prepared to accelerate its taper timeline to perhaps the next few months,” said Sean Bandazian, an investment analyst at Cornerstone Wealth. “There is still reason to believe we will see volatility throughout areas of the market with high sensitivity to interest rates.”

More comments:

• “Fed tapering is clearly in training camp mode, with Jackson Hole likely being a preseason game, and either the September or most likely the November FOMC meeting being the time to announce how they will pullback stimulus,” wrote Edward Moya, senior market analyst at Oanda.
• “It’s clear from the minutes that the Fed isn’t ready to start tapering yet, but they are leaning towards making an announcement by the end of the year at the latest,” said Chris Zaccarelli, chief investment officer at Independent Advisor Alliance.
• “While the Fed minutes reveal more conviction in terms of starting to taper this year, they made the bold point that there’s no connection between tapering and rate hikes,” wrote Mike Loewengart, managing director of investment strategy at E*Trade Financial.

Earlier Wednesday, St. Louis Fed President James Bullard said he would like to see the tapering of the asset-purchase program done by the first quarter of 2022. Several other officials, including Robert Kaplan of Dallas and Esther George of Kansas City, have urged the central bank to begin removing stimulus as soon as the September meeting. Chair Jerome Powell and Vice Chairman Richard Clarida have suggested they would like to see further progress before considering a move to taper.

Among the corporate highlights, Target Corp. slipped after the retailer’s sales growth slowed in the second quarter, hinting that the heightened consumer demand ushered in by the pandemic may be waning. Lowe’s Cos. jumped as the home-improvement giant raised its full-year forecast.

Elsewhere, oil dropped below US$65 a barrel for the first time since May 24 as new waves of COVID-19 threatened fuel demand.

Here are some events to watch this week:

• Bank Indonesia rate decision and Governor Perry Warjiyo briefing Thursday
• U.S. initial jobless claims, leading index Thursday

Some of the main moves in markets:

Stocks

• The S&P 500 fell 1.1 per cent as of 4 p.m. New York time
• The Nasdaq 100 fell 1 per cent
• The Dow Jones Industrial Average fell 1.1 per cent
• The MSCI World index fell 0.6 per cent

Currencies

• The Bloomberg Dollar Spot Index was little changed
• The euro was little changed at US$1.1713
• The British pound rose 0.1 per cent to US$1.3758
• The Japanese yen fell 0.2 per cent to 109.78 per dollar

Bonds

• The yield on 10-year Treasuries advanced one basis point to 1.27 per cent
• Germany’s 10-year yield declined one basis point to -0.48 per cent
• Britain’s 10-year yield was little changed at 0.57 per cent

Commodities

• West Texas Intermediate crude fell 2.5 per cent to US$64.90 a barrel
• Gold futures were little changed