American equities emphatically joined the international rout with the three major indices falling more than 2.25% after Fed Chairman Ben Bernanke outlined the conditions for the curtailment and end of its quantities easing program yesterday.
The Dow fell 353 points, 2.34% to 14,758 for the lowest close since May 1st and the largest point drop since November 9th 2011. The S&P 500 sank 41 points to 1,588, a 2.50% decline and the Nasdaq Composite shed 79 points, 2.28%, to close at 3,365.
The Dow has lost more than 5% since it touched 15,542 on May 22nd, the day Mr. Bernanke first indicated that the Fed was considering an end to its asset purchases. It remains 12.6% higher on the year.
The CBOE Volatility index, (VIX), the most widely traded measure of market fear, closed at 20.49, after touching 21.32 in intra-day trading. It was the highest close since December 28th last year.
In his press conference following the FOMC policy statement yesterday afternoon Mr. Bernanke said that the bank could begin to reduced its asset buying later in the year if the economy continues to improve, though it intended to continue its full complement of $85 billion a month for the time being.
Yesterday's afternoon comments led to a more than 200 point fall in the Dow, which was amplified around the world. In Asia the Chinese the Shanghai Composite Index dropped 2.76%, the Nikkei 225 in Japan skidded 1.74% and the Hang Seng in Hong Kong shed 2.88%. In Korea the Kopsi fell 2.00% and the Sensex in India fell 2.74%.
In Europe, the FTSE 100 in London shed 2.98%, the Dax in Germany dropped 3.28% and the Paris CAC 40 in declined 3.66%
Yields on the generic 10-year U.S. Treasury rose to a 22-month high at 2.42%. They have spiked 23 basis points since Tuesday's close at 2.19% and 79 points since the May 2nd close at 1.63%.
Chief Market Strategist