US stocks have fallen sharply on worries over turbulence in emerging markets, a decline that steepened after the US Federal Reserve cut back its monetary stimulus for the second straight month.
The Dow Jones Industrial Average slumped 189.77 points (1.19 per cent) to 15,738.79 on Wednesday.
The broad-based S&P 500 fell 18.30 (1.02 per cent) to 1,774.20, while the tech-rich Nasdaq Composite Index declined 46.53 (1.14 per cent) to 4,051.43.
Michael James, managing director of equity trading at Wedbush Securities, said the Turkish central bank’s doubling of its benchmark interest rate took investor concerns “to another level”, prompting the retreat from stocks and other risky assets.
A similar move in South Africa also failed to stem the erosion of its currency.
After European stocks slumped, US stocks opened in the red and dropped further after the Fed announced that it will reduce asset purchases by another $US10 billion ($A11.43 billion) in February to $US65 billion, a decision that was widely expected.
“People are edgy,” primarily because of the uncertain outlook on emerging-market economies, said Peter Cardillo, chief market economist at Rockwell Global Capital.
He said the Fed’s move, as well as a mixed bag of earnings reports, were smaller factors in the sell-off.
Dow component Boeing sank 5.3 per cent after it forecast essentially flat earnings in 2014 due to modest increases in commercial aeroplane deliveries and lower revenues from US defence orders.
AT&T fell 1.2 per cent amid concerns that the company’s outlook for cash flow had been cut. Morgan Stanley rated the company’s lofty payouts to shareholders a “wide concern.”
Citigroup, which has a comparatively large presence in emerging markets, fell 3.1 per cent on concerns about the outlook in these economies. JPMorgan Chase and Bank of America lost just 0.4 per cent and 0.3 per cent, respectively.
Yahoo tumbled 8.7 per cent after reporting a six per cent drop during the fourth quarter in display ad revenue that has long been at the core of Yahoo’s income.
Dow Chemical shot up 3.9 per cent after earnings of 65 cents per share bested the 43-cent analyst forecast. The company announced a 15 per cent dividend increase and an expansion to its share buyback program from $1.5 billion to $4.5 billion.
Bond prices rose sharply. The yield on the 10-year US Treasury fell to 2.68 per cent from 2.75 per cent Tuesday, while the 30-year declined to 3.62 per cent from 3.67 per cent. Bond prices and yields move inversely.
