Most of the drop in today's stock market traces to a slight backing-off by the Fed regarding the size of the quantitative easing program.
As I have written on previous blog posts, macroeconomic policy seems to be a major driver of the stock market these days. I think profit reports continue to play a role, however the huge amount of government intervention in terms of fiscal and monetary policy are creating distortion and an over reliance on various macroeconomic announcements such as the Fed's inclination toward quantitative easing.
At this stage, I think the economy must repair itself. This will take time and might include another recession within the next few years.
The current threat to stock prices is an over reliance on macroeconomic news and high frequency trading. The market needs more focus on profits and the condition of the consumer.
There are some preliminary indications that retailers feel consumers might be tapped out once again in terms of spending.
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