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Stocks, bonds extend slide as China adds to market fears of Fed stimulus pullback

 A day after the Federal Reserve roiled Wall Street when it said it could reduce its aggressive economic stimulus program later this year, financial markets around the world plunged. A slowdown in Chinese manufacturing and reports of a squeeze in the world’s second-biggest economy heightened worries.

The global selloff began in Asia and quickly spread to Europe and then the U.S., where the Dow Jones industrial average fell 353 points, wiping out six weeks of gains.

But the damage wasn’t just in stocks. Bond prices fell, and the yield on the benchmark 10-year note rose to 2.42 percent, its highest level since August 2011, although still low by historical standards. Oil and gold also slid.

“People are worried about higher interest rates,” said Robert Pavlik, chief market strategist at Banyan Partners. “Higher rates have the ability to cut across all sectors of the economy.”

The question now is whether the markets’ moves on Thursday were an overreaction or a sign of volatility to come. What is becoming clearer is that traders and investors are looking for a new equilibrium after a period of ultra-low rates, due to the Fed’s bond-buying, which spawned one of the great bull markets of all time.  Read More

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Posted on June 20, 2013, in #business news and tagged , , , , , , . Bookmark the permalink. Leave a comment.

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