June 20 - Summary: Stocks, bonds and gold sold-off sharply for a second day as investors react to the threat of a near-end of the Federal Reserve's easy money strategy that pumped up asset prices following the financial crisis. Conway G. Gittens reports.
The losses pile up as Wall Street contemplates what life will be like with less help from the Federal Reserve. Stocks cringed by more than two percent. The Dow nose-diving 353 points, the S&P 500 losing 40 points and the Nasdaq tumbling 78 points - in the worst day Wall Street has seen since November 2011. There was no place to hide as investors re-price their investments one-day after Federal Reserve Chairman Ben Bernanke laid out the frame work for a pullback in the Fed's $85 billion a month extra stimulus program. In support of Bernanke's view of a strengthening economy: sales of previously owned homes rose to a 3-1/2 year high in May. Manufacturing activity in the Mid-Atlantic rebounded in June. And jobless claims, though up last week, suggest modest job growth continues. But, investors are worried the U.S. economy may teeter once again with a less friendly Fed coupled with government austerity at home and worries from abroad, says Greencrest Capital's Max Wolff. SOUNDBITE: MAX WOLFF, CHIEF ECONOMIST/SENIOR ANALYST, GREENCREST CAPITAL (ENGLISH) SAYING: "We have a recovery, but a two percent estimator on a recovery is one that can't take much by way of bumps or hurdles and we are going to present potentially a fiscal and monetary policy hurdle. And the other big issue is that we may import some weakness from the emerging market space, with particularly the news out of China has not all been bullish on the growth side." There was no safe haven in bond pits. The yield on the 10-year note, which moves in the opposite direction of the price, touching highs not seen in almost two years. Gold sank to a 2-1/2 year low as the dollar swept higher for a second day. Commodity traders say the threat of higher interest rates will send the dollar higher - making any commodity priced in dollars worth less to international investors. Broader economic worries aside, Oracle's new license sales and cloud-based subscriptions were at the low-end of forecasts, putting a drag on overall revenues. European markets suffered even bigger percentage losses than Wall Street, with stocks down 3 or more percent.