The frenzied reaction to Fed Chairman Ben Bernanke’s announcement on Wednesday that quantitative easing would conclude by mid-2014 carried over into Thursday’s trading activity as the global sell-off gained frightening momentum.
Indices suffered major losses across the board, nearly doubling the previous day’s performance as investors attempted to digest the confirmation they had been asking for regarding when and how the Federal Reserve would remove the training wheels from the U.S. economy.
The S&P 500 was off 2.50 percent to close at 1,588.19, while the Dow dropped 2.34 percent to 14,758.32 and the Nasdaq was down 2.28 percent to end the day at 3,364.64 points, while the yield on 10-year Treasury bonds neared 2.50 percent for the first time in two years.
Nor was the blow softened by a corresponding uptick in commodities or “safe havens”, with gold down 7 percent, silver down 9 percent, and smaller but significant losses for oil, natural gas, corn, and rice. Furthermore, the news was exacerbated by economic data coming out of China that indicated a second consecutive month of slowing growth.
It is hard to imagine that markets seriously believed that the Fed’s fiscal policy would remain a permanent feature of the economy. However, the sell-off took on a global character overnight that made what at first appeared to be an overreaction or de facto correction look dangerously like a full-on bear market, at least from the perspective of real-estate and utilities that are now down more than 10 percent from their 52-week highs.
The Dow’s biggest losers were Walt Disney Co. (DIS), Intel (INTC), and Microsoft (MSFT), while the S&P 500 bore the brunt of petrified real-estate stocks. The Index’s top three losers for the day were residential construction companies PulteGroup Inc. (PHM), DR Horton Inc. (DHI), and Lennar Corp. (LEN), all down more than 7.50 percent, with a number of REITs in tow such as Boston Properties Inc. (BXP) and American Tower Corporation (AMT).
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