S&P and Dow Jones sell-off follows tapering fears

US share indices have followed the path of Treasuries as investors sell from fear of an imminent tapering of the Federal Reserve's asset purchase programme.

A reduction in the number of people signing up for unemployment benefits and the number of people currently on them at the start of August suggests that official unemployment figures may fall again.

Annual inflation in July was 2.0 per cent - exactly in line with the Fed target, and the 0.2 per cent monthly increase assuaged fears of a deflation.

The S&P and the Dow both fell around 1.5 per cent. Treasury yields touched a two-year high of 2.82 per cent.

But speaking to CNBC today, Wells Fargo chief information officer John Lynch said he expects the S&P could go as high as 1,900 over the next 15 months.

You can look at so many different valuation metrics. If you look at [P/E ratios between] 16.5 - 16.7 ... it can get to 1,850-1,900 relatively easily with a more conservative valuation than what consensus estimates are projecting....

I still think upside over the next 12-15 months, we've got about 10-12 percent but what we've seen in the last few days is that there is some trepidation. I would encourage all investors to really focus on valuation or P/E's relative to earnings and interest rates.

S&P:

Dow Jones: