n this Aug. 26, 2011 photo, a trader works on the floor of the New York Stock Exchange. The U.S. Federal Reserve's tacit acknowledgment that America's economic slowdown is likely to persist for quite a while sent global stock markets skidding Thursday, Sept. 22, 2011, as investors brushed off the central bank's efforts to spur growth and focused instead on its gloomy assessment. (AP Photo/Jin Lee)
Πηγή: AP
By FRANCESCA LEVY Sep. 22 2011
NEW YORK (AP) -- Stock futures plummeted Thursday after the Federal Reserve indicated that the U.S. economic slump could last for years.
On Wednesday afternoon, the Fed announced a portfolio rebalancing designed to drive down interest rates on long-term government debt. The move was largely expected, but stock markets began a late-day slide that carried over to overseas markets on Thursday.
Analysts say the news troubled investors for two reasons: the Fed's statement offered a bleak assessment of the future of the U.S. economy, saying it sees "significant downside risks to the economic outlook" including volatility in overseas markets.
Secondly, the Fed also decided to purchase bonds that matured after 30 years, hoping to push down rates far into the future. That was at the far end of the bank's expected range of Treasury purchases, and some investors think the bank might have maxed out its ability to have much of an impact on growth or interest rates.
The government reported Thursday that fewer people filed new claims for unemployment benefits last week. Still, the number of applications remains high, at 423,000. The U.S. jobs crisis is one of the major economic challenges cited by the Fed.
An hour before the market opening, Dow Jones industrial average futures fell 234 points, or 2.1 percent, to 10,773. Standard & Poor's 500 index futures fell 27, or 2.4 percent, to 1,128. Nasdaq 100 futures fell 46, or 2 percent, to 2,199.
FedEx Corp. slipped 0.7 percent in premarket trading after it said that it would earn less in 2012 than it had expected. The company is seen as something of an economic indicator since demand for the global shipper's services tends to line up with how the economy is doing.
The next big round of corporate earnings reports doesn't start for several weeks, but many analysts expect big corporations won't be able to sustain the strong profits they have had for the last few quarters.
Concern that Greece won't be able to avoid defaulting on its debt has also fueled the market's slide. Greeks clogged city traffic and shut down airports to protest the latest round tax hikes and spending cuts that the government is proposing.
Greece must make deep budget cuts to meet targets set by international lenders. The spending goals are a prerequisite for getting an $11 billion installment of the rescue package the country received in 2010. Without the funds, the country will run out of money to pay its bills by next month.
Investors worry that this is another sign Greece won't qualify for bailout funds. A Greek default would have repercussions for larger European economies that are struggling with debt and could tighten lending in the global banking system. Many fear it could set off a chain reaction that would echo the credit crisis of 2008.
On Wednesday, stocks fell sharply in the last 45 minutes of trading. The Dow Jones industrial average lost 283.82 points, or 2.5 percent, and closed at 11,124.84. The Standard & Poor's 500 index fell 35.33, or 2.9 percent, to 1,166.76 The Nasdaq composite fell 52.05, or 2 percent, to 2,538.19.
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