Wednesday, March 19, 2014
U.S. Stocks Drop as Fed’s Yellen Outlines Stimulus Exit
U.S. stocks fell for the first time in three days as Federal Reserve Chair Janet Yellen said the central bank’s stimulus program could end this fall and benchmark interest rates could rise six months later.
Walt Disney Co., General Electric Co. and Boeing Co. lost at least 1.4 percent to lead theDow (INDU) Jones Industrial Average lower. Consolidated Edison Inc. led utilities to the biggest decline among 10 groups in the Standard & Poor’s 500 Index. Newmont Mining Corp. lost 3 percent as gold tumbled the most in six weeks after the Fed’s decision to reduce asset purchases.
The S&P 500 slipped 0.6 percent to 1,860.77 at 4 p.m. in New York. The Dow slid 114.02 points, or 0.7 percent, to 16,222.17. About 6.7 billion shares changed hands in the U.S., in line with the three-month average.
“The pace of tightening, once the Fed starts tightening, is a little bit faster than thought before and I think that’s why we’re getting this market reaction,”John Canally, an economic strategist at LPL Financial Corp., said in a phone interview from Boston. His firm oversees about $438.4 billion. “Being reminded that the Fed will eventually raise rates is getting traders’ attention.”
By keeping its benchmark interest-rate target near zero and conducting three rounds of asset purchases, the Fed has helped push the S&P 500 up as much as 178 percent from a 12-year low as U.S. equities enter the sixth year of a bull market that started in March 2009.
Stocks turned lower today as the Fed’s statement said officials predicted their target interest rate would be 1 percent at the end of 2015 and 2.25 percent a year later, higher than previously forecast, as they upgraded projections for gains in the labor market. The central bank said it would trim its monthly bond purchases by $10 billion, to $55 billion.
Credit to Bloomberg