Dow Plunges 400 Points As Fed Stokes Economic Fears
NEW YORK (Reuters) - Stocks skidded 3 percent on Thursday, extending losses for a fourth day as a gloomy outlook from the Federal Reserve and weak data from China heightened fears of a global recession.
FedEx Corp shares fell 9.4 percent to $65.63 after the world's No. 2 package delivery company, an economic bellwether, pared its outlook for the full year in part because of the uncertain global outlook.
The market's dramatic selloff marked the worst performance in more than month on the heels of the previous session's drop after the Fed said the economy faced "significant downside risks" as it took another stab at boosting growth.
Market sentiment has turned decidedly negative since the Fed statement on Wednesday. Though the central bank detailed additional stimulus measures to help push down long-term rates, investors worried the latest plan would have little effect on lending and that there appeared to be few solutions to sluggish worldwide demand.
"The Fed scared the daylights out of people with the term 'significant,'" said Jack de Gan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.
"I was surprised ... they're very careful about the adjectives that they pick and that was a very, very strong one."
The Dow Jones industrial average slid 421.93 points, or 3.79 percent, at 10,702.91. The Standard & Poor's 500 Index or 3.22 percent, at 2,456.40 took off 40.29 points, or 3.45 percent, at 1,126.47. The Nasdaq Composite Index tumbled 81.79 points, or 3.22 percent, at 2,456.40.
The CBOE Volatility Index, considered Wall Street's fear gage, was up more than 10 percent.
Banks were among the top decliners. The Fed's plan to lower long-term rates will compress margins for banks that borrow at short-term rates and lend at longer-term rates. The declines also came a day after Moody's cut debt ratings for big lenders.
Citigroup Inc and Morgan Stanley fell to 52-week lows in early trade before recovering slightly. Citigroup was down more than 4 percent to $24.39 and Morgan Stanley slid 8.4 percent to $12.66.
The Select Sector Financial Sector SPDR funds was off more than 3 percent, also touching a 52-week low.
Data from China showed once-booming manufacturing contracted for a third consecutive month, while the euro zone's dominant service sector shrank in September for the first in two years, intensifying anxiety about another global setback.
In other company news, United Technologies Corp tumbled 8 percent to $68.65 after the diversified U.S. manufacturer agreed to pay $16.5 billion for aircraft components maker Goodrich Corp. Goodrich soared 10 percent to $120.54.
In the latest domestic data, Americans filed fewer new claims for jobless benefits last week, but the decline was not enough to dispel worries about the economy.
(Reporting by Claire Sibonney)
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