Recapping the day's news and newsmakers through the lens of CNBC.
Experts say Fed effects are widely misunderstood
Stocks have had a few bad days, with many analysts blaming fears of Fed tapering—quite an original rationale for a selloff. In fact, maybe that still-to-be-scheduled process, a reduction of the Federal Reserve's bond purchases that have kept interest rates low, has been made into more of a bogeyman than it ought to be.
Some experts argue that fear of tapering involves some misconceptions about how the banking system works: Fed bond purchases result in bigger bank reserves, which give the banks more to lend. Reversing the process can cause a world of hurt. Or so the argument goes.
The truth is, reserves remain reserves, so a change in Fed bond purchase levels should not be the shock to the system that Nervous Nellies fear. And some experts point out that any harm done by tapering would likely be offset by the increased economic growth that made tapering possible.
A simpler view of stocks' recent behavior focuses on the fact that the bull market is just getting a tad long in the tooth. Market leaders like transports and biotech stocks are weary after a good run. Among individual stocks, the number of new highs has been declining despite record highs for the S&P 500. And volatility is near a six-year low, suggesting investors have become complacent, which is often a warning sign.
"Indeed, in most systems, deposits at the central bank can only be held by banks, thus they are never lent 'out' of the banking system. Consequently, the notion that the quantity of bank reserves somehow constrains lending in a fiat money world is completely erroneous."—Peter Stella, director of Stellar Consulting
"We are so used to the markets going up that a brief pause is being met with the usual hand-wringing. ... Remember: the S&P 500 is stretched, better than 10 percent above its 200-day moving average."—CNBC's Bob Pisani
"I think the market will be in a waiting mode for a long time."—Wharton School finance professor Jeremy Siegel