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Stocks slump after weak earnings; Fed cuts stimulus

Jan. 30, 2014 @ 07:08 AM

NEW YORK — Stock inves­tors had plenty to dislike on Wednesday.

Disappointing earnings from big U.S. companies, ongoing jit­ters in emerging markets and more cuts to the Federal Reserve’s economic stimulus combined to push stocks lower for the fourth day out of the last five.

Boeing slumped after the plane maker said its 2014 rev­enue and profit would fall short of analysts’ expectations as its defense business slows and it delivers more of its 787 planes, which are less profitable. AT&T, the largest U.S. telecommunica­tions company, fell after its out­look for the year disappointed i nvestors .

Currencies including the Turkish lira and the South Afri­can rand fell against the dollar despite efforts by central banks in those countries to stem the declines by raising interest rates. Investors say those tighter credit policies, which can restrict lend­ing, come with risks.

“If the central banks out there continue to hike interest rates, they are going to destroy eco­nomic activity,” said Peter Car­dillo, chief market economist at Rockwell Global Capital. “That will impact the global economy as well.” The Standard & Poor’s 500 index fell 18.30 points, or 1 percent, to 1,774.20. The Dow Jones industrial average fell 189.77 points, or 1.2 percent, to 15,738.79. The Nasdaq compos­ite dropped 46.53 points, or 1.1 percent, to 4,051.43.

Stocks opened lower in response to the lackluster earn­ings news. The market added to its declines after the Fed’s announcement at 2 p.m. Eastern time. The Fed said it will lower its monthly bond purchases by $10 billion to $65 billion because of a strengthening U.S. economy.

The Fed is cutting back its bond purchases, which have held down long-term interest rates, even though the prospect of reduced stimulus has rattled global markets. The move was largely anticipated by analysts and investors.

 

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