Stocks Sink as Fed's Operation Twist Fuels Afternoon Sell-Off
After hemming and hawing just south of breakeven for most of the day, U.S. stocks took a decisive turn for the worse in the wake of the Federal Open Market Committee's (FOMC) highly anticipated policy statement. At 2:15 p.m. Eastern, a divided Fed unveiled "Operation Twist" -- a plan to shift its bond portfolio by selling $400 billion in shorter-term Treasury debt and buying longer-term Treasuries. In addition, the central bank -- unsurprisingly -- opted to stand pat on interest rates, and noted "significant downside risks to the economic outlook." The announcement was ill-received on Wall Street, to say the least, with the Dow Jones Industrial Average (DJIA) ending at a session low, and the CBOE Market Volatility Index (VIX - 37.32) -- otherwise known as the market's "fear barometer" -- tacking on more than 13% by the close.
After an early foray into the black, it was all downhill for the Dow Jones Industrial Average (DJIA – 11,124.84), which gave up 283.8 points, or 2.5%, by the time the bell mercifully rang. In fact, only Hewlett-Packard (HPQ) managed a win, adding 6.7% on reports that CEO Leo Apotheker might hit the bricks. On the flip side, Bank of America (BAC) led the 29 laggards with a 7.5% loss, thanks to a ratings downgrade at Moody's Investors Services.
The S&P 500 Index (SPX – 1,166.76) fared the worst of the three, surrendering 35.3 points, or 2.9%, to end beneath the 1,200 level for the first time in a week. Finally, despite solid tech-sector earnings, the Nasdaq Composite (COMP – 2,538.19) wasn't immune to the Street's wrath, swallowing a loss of 52.1 points, or 2%, by the close.