US stocks drop but markets soothed by Fed

US stocks fell more than one per cent yesterday, adding to a sell-off built on concerns about reduced stimulus from the Federal Reserve and on overnight losses in Chinese equity markets.

The market shed some of the day’s losses in the afternoon, but it was the third time in the past four sessions that the S&P 500 dropped more than one per cent.

Volume was again above-average, with 8.33bn shares traded on US exchanges, showing the pullback has not abated yet.

Losses at one point extended as far as two per cent, but stocks retraced some ground after two Fed officials downplayed the notion of an imminent end to monetary stimulus.

“We were really oversold in many different indices, so you would expect a bounce. The trick is, is this going to continue tomorrow?” said Sam Ginzburg, head of capital markets at First New York in New York.

“I would be careful of this move up. I wouldn’t be sure it sticks as of this time.”

Ginzburg said he would like to the S&P close over 1,600, a level which was support but now is resistance.

All 10 industry sectors on the S&P 500 ended lower, led by declines in materials, industrials and financial shares. Those sectors are most sensitive to the growth outlook and rising interest rates.

The Dow Jones industrial average finished down 139.61 points, or 0.94 per cent, at 14,659.56. The Standard & Poor’s 500 Index was down 19.34 points, or 1.21 per cent, at 1,573.09. The Nasdaq Composite Index was down 36.49 points, or 1.09 per cent, at 3,320.76.