World Economy

US Stocks Tumble as Fed Sows Fear, Confusion

US Stocks Tumble as Fed Sows Fear, ConfusionUS Stocks Tumble as Fed Sows Fear, Confusion

US stocks sank Friday, with the S&P 500 and the Dow Jones Industrial Average closing down for the week, as Federal Reserve’s decision to leave interest rates unchanged fueled fears about global economic growth.

The central bank cited concerns about the global economy and a lack of inflation growth in its Thursday decision to leave interest rates unchanged, MarketWatch reported.

“Many are confused by the outcome of the recent Fed meeting,” said Kent Engelke, chief economic strategist at Capitol Securities Management. “Markets hate confusion and lack of clarity.”

The S&P 500  skidded 32.16 points, or 1.6%, to close at 1,958.08 for a weekly loss of 0.2%. All S&P 500 sectors finished lower, led by energy shares.

The Dow Jones Industrial Average dropped 289.95 points, or 1.7%, to close at 16,384.79 with all 30 components in the red. The blue-chip index edged down 0.3% for the week.

The Nasdaq Composite shed 66.72 points, or 1.4% to 4,827.23. The tech-heavy index is the only one of the three major stock barometers to finish out the week higher with gains of 0.1%.

Trading volume was elevated, with 5.74 billion shares changing hands on the New York Stock Exchange, due to “quadruple witching,” which means the expiration of various stock-index futures, stock-index options, stock options and single-stock futures. Friday is the second highest volume day of the year.

“By not raising the rates, the Fed is now fanning global growth fears,” said Steven Wieting, global chief investment strategist, at Citi Private Bank.

“The key for future market action depends largely on whether or not the Fed had any good cause to worry about international developments,” Wieting said.

Weak oil prices and investors rotating into bonds as Treasury rallied in wake of the Fed’s decision also pressured stocks, said Ian Winer, director of equity trading at Wedbush Securities.

October West Texas Intermediate crude skidded 4.7% to settle at $44.68 a barrel. Treasury yields fell and prices rose with the yield on the two-year treasury note dropping 6.7 basis points to 0.678%. The 10-year treasury note yield declined 5 basis points to 2.14%.

“We are not surprised to see the selloff in the market, as investors are realizing that the zero-rate policy for the past seven years has not resolved any issues in the economy,” said Bruce Bittles, chief investment strategist at R.W. Baird & Co.

 Asia Creaks

Stock markets in Asia-Pacific creaked to a higher close for the week after an early bout of currency market volatility following a decision by the US Fed decision. However, Japan’s market swung to a loss for the week after the yen strengthened.

The Nikkei Stock Average fell 2% on Friday, taking its losses for the week to 1.1%, while most shares elsewhere were up and currencies mixed.

The Hang Seng Index rose 0.3% to close at 21,920.83, up 1.9% for the week. The Shanghai Composite Index rose 0.4% to recover some losses for the week, with shares seeing some choppiness ahead of the close. The benchmark has shed 3.2% this week with brokers citing investor nervousness around the Fed’s decision as well as some weakness in economic data.

The Fed left short-term rates unchanged after weeks of market-churning debate at the central bank, as many investors had expected.