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Stocks slide as investors fear Fed will end stimulus

June 20, 2013|By Joe Bel Bruno
  • Wall Street is nervous about the possibility that the Federal Reserve may taper off a bond-buying stimulus program as early as this year.
Wall Street is nervous about the possibility that the Federal Reserve may… (Michael Nagle / Bloomberg…)

Investors fled the stock market for a second-straight day on fears that the Federal Reserve will begin phasing out the stimulus program that has helped revive Wall Street and boosted the ailing U.S. economy.

The Dow Jones industrial average closed down more than 350 points on Thursday, following a 200-point plunge a day earlier. The blue-chip index has given up more than 4% during the two-day sell-off.

What has the market spooked is that Fed Chairman Ben Bernanke said in a news conference on Wednesday that the economy was looking stronger. And, because of that, he said policymakers may taper off a bond-buying stimulus program as early as this year.

Analysts believe the Fed could potentially end its $85-billion-a-month asset purchase program as soon as next year. Such a move would send interest rates higher, which would hurt the stock market.

The bond market also was slammed on Thursday. The benchmark 10-year Treasury yield, which moves opposite to its price, ratcheted higher to 2.44%. There was no escape to typically safer investments like gold, whose price slid almost 7% during the session.

Most every stock was down in the Dow, but especially hard-hit were home-building stocks. Traders worried that a rise in interest rates might hurt the housing industry's recovery. D.R. Horton and PulteGroup tumbled more than 10%.

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