Equities plunge, Treasurys surge on Fed announcement

Michael Watson Contributor
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After the Federal Open Market Committee (FOMC) announced its intention to convert $400 billion in short-term Treasury holdings into 10-year Treasurys, the major stock indexes dropped sharply Wednesday. Ten-year Treasury yields also fell, indicating higher demand for those securities.

At market close, the Dow had lost over 250 points. The NASDAQ slipped 50 and the S&P 500 plunged 35. (RELATED: Report: Shareholder activists abuse Dodd-Frank regulations)

The FOMC said in its statement that “The Committee continues to expect some pickup in the pace of recovery over coming quarters.” However, the committee also noted that unemployment would “decline only gradually” toward acceptably low levels.

The Federal Reserve made the announcement shortly after 2:00 p.m. Wednesday. Beforehand, the Dow was virtually unchanged for the day, the NASDAQ was up about 15 points, and the S&P 500 index was down just 2 points.

All three indexes moved sharply down from those peaks during the 2 o’clock p.m. hour, but rallied after around 3:00 p.m. before plunging aggressively as the markets neared close.

The 10-year Treasury yield fell by 7 basis points. Two-year Treasury yields rose by nearly 5 basis points.