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Stocks Tumble As Investors Get Bad News On Citigroup
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"The size does catch your eye, but it's what they needed to do to keep the Fed funds rate down to 4.5 percent," said Stuart Hoffman, chief economist at PNC Financial Services Group.
The losses Thursday in the stock market wiped out gains from the previous day, when investors cheered the Fed move and sent the Dow up 137 points.
Throughout the summer's credit freeze, jittery investors were overcome by a notion that bad news was just around the corner. With no major surprises and signs of thawing in several areas of the credit market, investors had begun to look at events of the summer in the rearview mirror. They are learning now that the tentacles of subprime mortgages, at the epicenter of the credit problems, are far-reaching.
Market strategists said Thursday's decline on Wall Street came as investors digested overnight the Fed's policy statement from Wednesday, which noted concerns about inflation and appeared to preclude further cuts.
"Oftentimes, the day after is a choppy ride because the full extent of the news settles in on us," said Art Hogan, chief market analyst at Jefferies. "We were very excited yesterday about the fact that the Fed cut. That's what we wanted and expected. We celebrated that. But as we sort of wake up today and say, 'Wait a minute, they took the punch bowl away' . . . that takes away the guarantee that we had in this market that they're going to continue to cut interest rates again."
The Dow, made up of 30 blue-chip stocks, fell 362.14, or 2.6 percent, to close at 13,567.87. The Standard & Poor's 500-stock index, a broader market measure, fell 40.94, or 2.6 percent, to 1508.44. The tech-heavy Nasdaq composite index fell 64.29, or 2.3 percent, to 2794.83.
Staff writer Howard Schneider contributed to this report.
