STOCKS dropped more than one per cent yesterday, hitting session lows after the Federal Reserve stuck with its plan to scale back stimulus even in the midst of emerging market turmoil.
With the day’s decline, the S&P 500 is down four per cent for the month – its worst monthly loss since May 2012.
Some investors have been bracing for a correction, given the S&P 500’s gain of 30 per cent last year.
Trading was volatile after the Fed’s move, which further reduces its monthly bond purchases by $10bn a month. Declines were fairly broad-based, with nine of the 10 S&P 500 sector indexes ending lower. Shares of Boeing ranked among the biggest drags on both the Dow and the S&P 500.
Overall improvement in the US economy suggested the central bank would continue to cut the purchases, but some investors had speculated in recent days that the Fed might rethink its plan because of the emerging market problems.
“I think investors had hoped that the Fed would somehow respond to the recent turbulence and show they had their back,” said Jack Ablin, chief investment officer of BMO Private Bank in Chicago.
The Dow Jones industrial average fell 189.77 points or 1.19 per cent, to end at 15,738.79. The S&P 500 lost 18.30 points or 1.02 per cent, to finish at 1,774.20. The Nasdaq Composite dropped 46.53 points or 1.14 per cent, to close at 4,051.43.
The CBOE Volatility Index or VIX, Wall Street’s barometer of fear, jumped 9.81 per cent to end at 17.35.