Money & Company

Tracking the market and economic trends
that shape your finances.

« Previous Post | Money & Company Home | Next Post »

Stocks plunge on concerns about new Fed program

September 22, 2011 |  7:49 am


The Dow Jones industrial average plunged more than 300 points in early trading as investors recoiled from the Federal Reserve's new effort to stimulate the economy and the central bank's statement that the economy may be in for a long period of slow growth. 

A little more than an hour into the trading session, the Dow was down 300.91 points, or 2.7%, to 10,823.93. The broader Standard & Poor's 500 index was down 2.3%.

The losses built on declines late Wednesday after the Fed announced it would attempt to bring down long-term interest rates by replacing $400 billion of its holdings of short-term government debt with long-term U.S. Treasury bonds.

Analysts have questioned whether the program will have the desired beneficial impact, given that the economy is facing significant headwinds and long-term interest rates are already quite low.

The Fed also rattled investors Wednesday by highlighting "significant downside risks to the economic outlook." The statement ramped up fears that the economy could be headed for a new recession.

The continuing fallout from the central bank's announcement overshadowed a report Thursday showing that new claims for unemployment benefits dropped slightly last week from the week before.


Fed seeks economic boost by shifting its bond mix

Moody's cuts BofA, Wells Fargo and Citigroup credit ratings

Q&A: How the Fed move could affect the economy and markets

--Nathaniel Popper

Photo: Traders on the floor of the New York Stock Exchange on Thursday. Credit: Associated Press