Stocks initially opened in negative territory after Fed Governor Jeremy Stein highlighted the upcoming September policy meeting as a possible time when the central bank may need to consider paring back its QE program, adding that the Fed consider the overall economic improvements since it launched the stimulus instead of giving undue weight to the most recent round of tepid economic data.
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Stein's comments contradicted comments from other Fed policymakers who have suggested the central bank will bide its time before scaling back its bond purchases.
Menawhile, Richmond Fed President Jeffrey Lacker said markets should brace for more volatility as they digest news the Fed will scale back bond buying later this year, but the swings will not derail growth. Lacker said he expects U.S. growth to remain around 2 percent for the "foreseeable future."
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On the economic front, business activity index in the Midwest fell in June to 51.6 from 58.7 in May, according to the Institute for Supply Management-Chicago. A Reuters survey of economists on average expected a median reading of 56.0 in June versus the May figure of 58.7.
Meanwhile, consumer sentiment improved in late June, with the final reading on the overall index at 84.1, above the preliminary reading of 82.7, according to Thomson Reuters/University of Michigan. Economists polled by Reuters had forecast the final June reading of 82.8.
Japan's benchmark stock index hit a three-week high on the heels of positive economic reports that include much stronger than expected industrial output and retail sales numbers.
"We had better job market numbers, better production numbers, and even consumer prices are picking up. So data-wise, today is a pretty good day for Japan," said Takuji Okubo, principal and chief economist at Japan Macro Advisors.