NPR : News

Filed Under:

Dow Loses 350 Points After Fed Hints It Will Stop Buying Bonds

The Dow Jones industrial average closed down more than 353 points on Thursday in a selloff sparked by uncertainty about the end of a government monetary stimulus program and a credit crunch in China.

Wall Street followed a downturn in global markets. The Standard & Poor's 500-stock index lost 2.5 percent, while the Dow and Nasdaq composite indexes both lost 2.3 percent.

On Wednesday, Federal Reserve Chairman Ben Bernanke reassured investors that interest rates would remain low for the foreseeable future, but he hinted that if the U.S. economy continued to improve, it was only a matter of time before the central bank halted its monthly purchase of approximately $85 billion worth of bonds.

"What the Fed's action did ... was to confirm that unless things in the U.S. get worse then the music is going to be turned down at the party and the dancing is about to end," Paul Lambert, head of currency at Insight Investment in London, told The Wall Street Journal. "This adjustment is likely to be a volatile one."

As worrisome for some investors is a surge in interbank lending rates in China in the past two weeks that has caused a stall in bank-to-bank borrowing.

According to The New York Times:

"A huge shadow banking operation has emerged in China in recent years, with smaller banks and trust companies borrowing from bigger state-run banks and then turning around and re-lending that money at high interest rates to private companies and property developers, usually those that have trouble borrowing.

"It is a risky strategy for the Chinese government, which is also grappling with a slowing economy. Many of those companies may have a harder time paying back their loans and many analysts fear the losses could ripple through the banking system."

Copyright 2013 NPR. To see more, visit http://www.npr.org/.

NPR

Robert Irwin Brings 'Big' To Texas With Permanent Art Installation

The 87-year-old conceptual artist unveils a large-scale installation of his work in Marfa, Texas, this week. He's spent his career creating site-specific art that often treats light as its subject.
NPR

Scraped, Splattered — But Silent No More. Finally, The Dinner Plate Gets Its Say

Instagram is the Internet's semi-obsessive, borderline-creepy love letter to food. But behind every great meal is a plate doing a pretty-OK job. So a comedian made an Instagram to celebrate plates.
NPR

WATCH: Tim Kaine Makes Campaign Trail Debut: 'I Like To Fight For Right'

"Do you want a 'you're fired' president or a 'you're hired' president?" Kaine asked the crowd in Miami.
NPR

Making The Cloud Green: Tech Firms Push For Renewable Energy Sources

Few people can demand what kind of electricity they get. But Microsoft and Facebook, which operate huge, power-hungry data centers, are trying to green up the electricity grid with their buying power.

Leave a Comment

Help keep the conversation civil. Please refer to our Terms of Use and Code of Conduct before posting your comments.