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

Hieronymus Bosch Died 500 Years Ago, But His Art Will Still Creep You Out

Known by some as "the Devil's painter," Bosch depicted imaginary animals and souls being violently tortured. At least one critic believes he's the father of modern art.
NPR

With A Zap, Scientists Create Low-Fat Chocolate

Scientists say they've figured out how to reduce the fat in milk chocolate by running it through an electric field. The result is healthier, but is it tastier?
WAMU 88.5

Analysis Of The Last Supreme Court Decisions Of The Term

Supreme Court decisions are expected soon on issues that include access to abortion and limits on executive power: Analysis of major decisions at the end of the term and the impact of a vacant seat on the court.

NPR

President Obama Acknowledges 'Brexit' To Silicon Valley Crowd

President Obama delivered a speech Friday at Stanford University, and remarked on the Brexit vote in front of a crowd of young, tech-forward, pro-globalization attendees from 170 countries.

Leave a Comment

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