The Dollar and treasuries erased gains as US stocks slumped after an official from the Federal Reserve said that the central bank should consider delaying the closure of the bond buying program.
The S&P 500 Index dropped 0.3% in New York after dropping as high as 1.5% earlier. The 10-year Treasury yield gained 2 basis points to 2.16%, reversing its earlier decline. The Russell 2000 Index gained 0.4%. The Stoxx Europe 600 Index lost 0.4% after dropping more than 2.9%.
James Bullard, St. Louis Fed Bank President said that the central bank needs to consider delaying the closure of the bond buying to stop the decline in expectations for inflation, as reported by Bloomberg.
Money manager at Nicolaus & Co., Chad Morganlander said, “The Bullard comments were a short-term shot of adrenaline. The US economy is doing quite well, yet there’s overall concern that the euro zone is falling into the abyss.”
Bullard said, “Inflation expectations are declining in the US. That’s an important consideration for a central bank. And for that reason I think that a logical policy response at this juncture may be to delay the end of the QE.”
According to MSN Money, global shares lost about $672 billion while average bond yields all over the world dropped to records after reports indicated a decline in US retail sales that was bigger than projected. The S&P 500 lost more than 3%, the largest intraday drop in three years before paring losses in the last two hours of trading.
Investor psychology has been affected by Ebola’s spread and investors are looking at corporate earnings for clues on the strength of the economy. There was a rise of 4.8% in the profit for S&P 500 members in the third quarter while the sales increased by 4.2% according to analysts’ expectations.