Ben Bernanke Spooked Wall Street
Update (12:08 p.m.): Looks like spooked may have been an understatement. The Dow is currently down 420 points.
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Things are getting scary on Wall Street this morning. At the start of trading, the Dow Jones Industrial Average plunged 350 points and the Standard & Poor's 500-stock index lost 2.6 percent in conjunction with a massive world market sell-off. As CNN Money reports, the tremors began in Asia following the Federal Reserve's statement yesterday, which warned of a "significant" risk the U.S. economy could begin a downturn. "In Asia, the major indexes all finished more than 2% lower. Tokyo's Nikkei index dropped 2.1%. Shanghai's SE Composite Index lost 2.8%. And Hong Kong's Hang Seng index suffered a 4.9% drubbing." The New York Times reports that "investors have been unnerved by the failure of policy makers in the 17-nation euro zone to resolve the region’s debt crisis" citing a bleak economic report in Europe:
A closely watched economic report from the euro zone — the composite purchasing managers’ index — fell to 49.2 in September from 50.7 in August, according to Markit, a financial data provider. The reading, released Thursday, was below the consensus forecast of 49.8. Both the manufacturing and services indexes declined.
“The initial and follow-up reaction from the equity market is likely the realization that the Fed has little left to offer, that Washington is a mess, and their only hope is to “ride it out” over a long period of time,” said Kevin H. Giddis, the executive managing director and president for fixed-income capital markets at Morgan Keegan & Company.
“This is about to get ugly and there is very little anyone can do about it,” he added in a research note.
