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Stocks Slump as Fed Sticks with Plan to Trim Stimulus

Trader works on the floor of the New York Stock Exchange on Wednesday. The Dow fell almost 200 points as the Federal Reserve said it will cut another $10 billion from its stimulus package.
A trader works on the floor of the New York Stock Exchange on Wednesday.The Dow fell almost 200 points as the Federal Reserve said it will cut another $10 billion from its stimulus package. BRENDAN MCDERMID / Reuters

The Dow fell almost 200 points on Wednesday in a sharp reaction to the Federal Reserve's decision to cut another $10 billion from its stimulus package that has buoyed markets in recent months.

The Fed decision to stick with its plan to continue to reduce its monthly bond purchases, now down to $65 billion, regardless of recent distress in emerging markets, was expected.

Jonathan Lewis, chief investment officer at Samson Capital Advisors, wrote:

"Today's Fed decision to continue with tapering, despite the unfolding turmoil in emerging markets, suggests the Fed has a domestic policy compass firmly in hand. The Fed is sending a clear message that unless a much larger scale crisis emerges, do not expect the Fed to deviate from its current policy path."

The Dow Jones Industrial Average, which ended a five-day losing streak on Tuesday, initially dropped 215 points after the Fed announcement. But it rallied somewhat, before closing down 189 points, or 1.19 percent.

The S&P 500 lost 18 points and the Nasdaq declined 46.

The yield on the 10-year Treasury note fell to a low of 2.68 percent, its first time under 2.7 percent since Nov. 26.