The LookoutStocks plummet after Fed announcement
Global markets have plunged since Wednesday afternoon, despite -- or perhaps because of -- the Federal Reserve's announcement that it would step in once again to try to jolt the ailing economy.
The Dow and the S&P 500 both dropped 3 percent in early trading Thursday, with the Nasdaq falling slightly less. In Europe and Asia, stocks were sharply lower, too. Investors fled risky stocks for the safety of U.S. Treasury bills.
The Fed said Wednesday afternoon that it would buy $400 billion worth of longer-term Treasuries, in order to push down interest rates and encourage borrowing -- a plan dubbed "Operation Twist". But it also offered an even gloomier-than-expected economic outlook, noting "significant downside risks" to the global economy, and "strains" in world financial markets -- an apparent reference to Europe's debt crisis.
Investors may now be responding more to that bleak assessment than to the announcement of Operation Twist, which was largely anticipated.
"The situation is getting worse," Jamie Cox, managing partner at Harris Financial Group, told the Wall Street Journal. "The Fed didn't specifically say 'Europe,' but they meant it. One can try to point to five or six different reasons why the markets are down but every one of them turns back toward the sovereign debt [problem] in Europe."
