Wall Street slumps on questions about economic recovery
US stocks dropped Wednesday as investors expressed jitters about the stability of the economic recovery a day after the Federal Reserve took its first action in months to encourage growth, dpa reported.
Worries that the recovery may be faltering caused stocks to decline around the world as investors feared the US central bank's move Tuesday to buy up more government debt could signal problems ahead.
Also Wednesday, the Commerce Department said rising imports pushed the US trade deficit to its highest level in nearly two years in June.
The deficit widened to 49.9 billion dollars, up from 42 billion dollars in May. Imports climbed 3 per cent to 200.3 billion dollars, while exports dropped more than 1 per cent to 150.5 billion dollars.
The gap was larger than economists had expected and the widest since October 2008, the height of a financial crisis that helped push the world economy into recession.
The US central bank warned the economy was recovering at a "more modest" pace than expected, prompting the Fed to take its first fresh steps in more than a year to boost growth.
The Fed held interest rates at a record low of near 0 per cent and pledged to buy up more government debt, by reinvesting matured mortgage-backed securities into long-term Treasury securities.
The blue-chip Dow Jones Industrial Average fell 265.42 points, or 2.49 per cent, to 10,378.83. The broader Standard and Poor's 500 Index dropped 31.59 points, or 2.82 per cent, to 1,089.47. The technology-heavy Nasdaq Composite Index plunged 68.54 points, or 3.01 per cent, to 2,208.63.
The US currency climbed to 77.85 euro cents from 75.89 euro cents on Tuesday. The dollar fell against the Japanese currency to 85.28 yen from 85.43 yen the previous day.