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Wall Street takes hit as Fed continues tapering plan

English.news.cn   2014-01-30 12:05:27

NEW YORK, Jan. 29 (Xinhua) -- U.S. stocks tumbled Wednesday with all three major indices falling more than 1 percent, after the Federal Reserve decided to further scale back its monetary stimulus.

Despite recent turbulence in some emerging markets, the U.S. central bank, referring to strengthening economic activity in recent quarters, chose to go on with its plan of gradual tapering by reducing the bond purchases by another 10 billion U.S. dollars.

"The Fed tapering was not the main cause of the sell-off but it seemed to remind the market that more uncertainty lies ahead as the question remains how will the economy and market deal with the reduced monthly Fed bond purchases," Gregory J. Keating, managing director at James E. Coffey Securities Inc., told Xinhua.

The Fed also said in a statement that it will likely reduce the pace of asset purchases in further measured steps at future meetings as long as incoming economic data remain consistent with its expectations.

"The market reaction to the Fed tapering was not really too much with the surprise since it had seen selloff for the last few weeks," Mark Newton, chief technical analyst at Greywolf Execution Partners Inc., said in a phone interview with Xinhua.

"We haven't been able to really see any signs yet of stabilizing at least in the near short run. It still looks like we can have a bit more to go on the downside," he predicted.

The CBOE Volatility Index, a gauge of market expectations of near-term volatility, soared nearly 12 percent to 17.66.

The retreat of U.S. stocks came on the heels of a broad dip in European stocks and mixed picture in Asian stocks, as there continued to be fears over emerging markets, despite swift hikes in interest rates by central banks in India, Turkey and South Africa.

"Emerging markets will stabilize in the next week. It might take a few days, but I think that we are closer to the end than the beginning of sell-off," said Newton.

However, Keating said he believes that as the Fed continues to taper, these markets will remain under pressure in the short term, until the global economies show signs of increased growth.

A pair of lackluster corporate earnings from Dow components also weighed on the market. Shares of both AT&T and Boeing slid after they issued weaker-than-expected guidance for 2014.

Meanwhile, U.S. mortgage applications fell 0.2 percent for the week ending Jan. 24, according to the Mortgage Bankers Association.

Wednesday's sell-off wiped off all the gains in the previous session. The U.S. stock market rebounded on Tuesday after sinking for several days, with the S&P 500 snapping a three-day loss, as stocks around the world calmed down.

By the closing bell, the Dow Jones Industrial Average dipped 189.77 points, or 1.19 percent, to 15,738.79. The S&P 500 slipped 18.30 points, or 1.02 percent, to 1,774.20. The Nasdaq Composite Index plunged 46.53 points, or 1.14 percent, to 4,051.43.

As for the whole year of 2014, Newton predicted that U.S. stocks would probably be flat or might be 5 percent down. "I certainly think the odds are reduced now that we get a huge return like last year," he said.

Keating projected that in the short term volatility would continue in the market, given that the market would not only try to digest the Fed's moves but have to deal with another debt ceiling debate shortly.

"Time will tell but I believe these down days we have seen recently is healthy for the market and we will have a have a positive year," he said.

Editor: An
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