Fed’s Fisher pushes back against stock selloff

CHINA, RATE WORRY GANG UP ON STOCKS

I don’t want to go from wild turkey to ‘ cold turkey’ overnight Big money does organize itself somewhat like feral hogs. If they detect a weakness or a bad scent, they’ll go after it

North American equity markets pared steep early losses on Monday after U.S. Federal Reserve officials said investors are overreacting to the central bank’s plans to curb its quantitative easing program by year end.

But stocks on both sides of the border still closed lower for the third day in the past four on persistent fears about stimulus tapering and China’s mounting banking crisis.

“Markets tend to test things,” Richard Fisher, president of the Dallas Federal Reserve, said in an interview with the Financial Times on Monday.

“I don’t think anyone can break the Fed.... But I do believe that big money does organize itself somewhat like feral hogs. If they detect a weakness or a bad scent, they’ll go after it.”

Mr. Fisher said the Fed anticipated lively market reaction to last week’s announcement that it may start tapering its bond-buying program later this year and bring it to a close by mid-2014.

But he reminded investors the central bank has not started reducing its purchases, but only announced that tapering would begin when conditions were right.

It “made sense to socialize the idea that quantitative easing is not a oneway street,” he said. But he added, “I don’t want to go from wild turkey to ‘cold turkey’ overnight.”

Minneapolis Fed president Narayana Kocherlakota on Monday also weighed in on the matter, saying he is not worried about the negative market reaction to date.