Fed chairman sparks sell-off
US EQUITIES tanked and government bonds rallied yesterday after Federal Reserve chairman Ben Bernanke said the country’s economy faced “unusually uncertain” prospects.
All sectors of the S&P 500 shares index fell as Bernanke delivered a cloudy outlook a week after his staff slashed growth forecasts.
The 56-year-old told the Senate Banking Committee: “Even as the Federal Reserve continues prudent planning for the ultimate withdrawal of monetary policy accommodation, we also recognise the economic outlook remains unusually uncertain.”
His comments, delivered in a tone more downbeat than many had expected, sparked a broad flight from risk. The S&P 500 closed down 1.3 per cent at 1,069.56, the Dow Jones dropped 1.1 per cent to 10,120.30 and the Nasdaq shed 1.6 per cent to finish at 2,187.33. Safe-haven US Treasuries rallied, with the 30-year bond rising nearly two points in price as traders bet on a low-growth, low-inflation and low-interest rate environment for some time to come.
Lou Brien, a market strategist for DRW Trading in Chicago said: “The key is the more subdued outlook for economic growth in general and inflation in particular.”