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Published On: Thu, Jun 20th, 2013

S&P 500 retreats on Federal Reserve tapering

Hightlights:

  • DJIA and S&P 500 declined by 2.3% and 2.5%

  • All sectors register declines

  • DJIA failed to find a single constituent with gains at the close of play

US stocks decline

US stocks joined equities from across the globe in declines today as investors looked towards a future without monetary stimulus from the world’s largest economy.  It was the US markets first opportunity to respond to the results from the Federal Reserve’s meeting which were announced last night. Adding to declines was negative data coming out of China, suggesting says a slowing of economic growth in the world’s second-largest economy.

Every sector of the S&P 500 saw declines as the index itself fell by 2.5 percent, closing at 1588.19. The narrower Dow Jones industrial average slipped by 2.3 percent, or 353.87 points, to close at 14,758.32. Losses were the biggest single day declines that either index had seen since 2011, a feat matched in both Europe and Asia, where stocks declined by 3 percent and 4.1 percent respectively.

Federal Reserve Chairman, Ben Bernanke, made the announcement late last night the central bank will begin winding down monetary stimulus within the next six months if the US economy shows signs of growth and stability. Many analysts are now predicting the $85 billion month bond buying program will be slashed by almost 25 percent at the Fed’s policy meeting which is scheduled to be held on September 17th and 18th of this year.

No stock was deemed to be safe by investors as they began a massive selloff, leading to all constituents of the Dow Jones industrial average registering a decline for the day. Cisco Systems Inc. was the least affected with the decline of just under 1 percent, while at the other end of the scale Walt Disney Co. slumped by $2.35, or 3.65 percent.

The S&P 500 is declined by 2.6 percent so far in June and 4.9 percent since May 21, the day before the Federal Reserve chairman rocked the boat with his warning of monetary stimulus tapering. James Paulsen summed the situation up perfectly in his interview with Bloomberg earlier today when he said “the buyers of saying ‘I’m going to wait and see.’ They are not learning to the exits but they are also not willing to catch a falling knife.”

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About the Author

- Gregory previously worked for a leading financial news publication and is now assistant news editor of financialtrading.com.

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