The Federal Reserve’s plan to keep interest rates low with Operation Twist was not enough to satisfy investors around the world as a major sell off pulled stocks lower around the globe. Wall Street is down as much as 4 percent today after falling 2 percent immediately following the Fed’s announcement. The bearish turn was sparked mostly by the negative economic outlook and risks the U.S. central bank outlined when it addressed the market. The growing sentiment seems that Operation Twist is actually more about preventing conditions from getting worse and not necessarily having enough of an impact to encourage economic growth. Initial jobless claims fell by 9,000 last week to 423,000 but no new net jobs were created. Compounding the nonexistent growth in the U.S. is the worsening situation in Europe, where the risk of Greece defaulting could lead to a massive contagious downturn in the financial market. Italy, Portugal, Ireland and Spain could all be next in line of the domino effect if Greece does not receive it’s next bailout installment. The challenge for the International Monetary Fund and European Central Bank to is quarantine the contagion. Commodities have been absolutely hammered today, with oil down around 7 percent on lowered demand expectations, and gold down about 4 percent as investors are forced to liquidate to cover losses in other assets.
Major U.S. Stock Indices
DJIA: 10,696.02 (-3.85 percent)
S&P 500: 1,126.66 (-3.44 percent)
NASDAQ: 2,457.49 (-3.18 percent)
Russell 2000: 645.64 (-2.85 percent)
In other news:
- Political indecisiveness and squabbling has been a major reason why governments around the world have not been on the ball in dealing with the economic malaise. [WSJ]
- Former eBay (EBAY) CEO and California gubernatorial candidate Meg Whitman is expected to be named new head of struggling HP (HPQ). [Marketwatch]
- Goldman Sachs (GS) could report a quarterly loss in its next earnings report, something that has only happened once since the company has been public. The last time was during the recession in 2008. [Bloomberg]
- As job demand shrinks and older workers are forced to put off retirement, the growing number of unemployed youths could have a long-lasting impact on the world’s future economy. [Economist]
- The case for why the market is irrational and is down for no real reason. [Reuters]
Check back as more news develops.