Stocks extend slide after Fed comments

By Steve Rothwell, Associated Press

Thursday, June 20, 2013 | 7:35 a.m.

NEW YORK — Stocks extended their slide after the Federal Reserve said it could start scaling back its economic stimulus program later this year and end it by the middle of next year.

Comments from Fed Chairman Ben Bernanke in a press conference prompted stock and bond markets to slump Wednesday, and the wave of selling continued in global markets Thursday. Gold led a plunge in commodity prices and the dollar rose against other currencies.

The Dow Jones industrial average was down 141 points, or 0.9 percent, to 14,971 after the first half-hour of trading. The Standard & Poor's 500 index dropped 14 points, or 0.9 percent, to 1,614. The Nasdaq composite fell 31 points, or 0.9 percent, to 3,412.

The Federal Reserve is buying $85 billion worth of bonds every month to hold down interest rates and encourage borrowing. The stimulus has been a major support for the economy and helped drive a rally in stocks that pushed the Dow and the S&P 500 to record levels this year.

The yield on the 10-year Treasury note rose to 2.40 percent, the highest since October 2011, from 2.35 percent Wednesday. The yield, which rises as the price of the note falls, surged 0.16 percentage point yesterday after the Fed's comments. It's up sharply since May 3, when it hit a low of for the year of 1.63 percent.

Government bond yields are used as benchmarks for mortgage rates. The sharp increase in yields prompted investors to sell the stocks of homebuilders, whose business would be hurt if the pace of home buying slows down. PulteGroup fell the most of any stock in the S&P 500 index, giving up $1.49, or 7 percent, to $19.30. D.R. Horton fell $1.11, or 4.7 percent, to $22.29.

Global markets also fell. Japan's Nikkei index lost 1.7 percent. In Europe, the FTSE 100 index of leading British shares was down 2.2 percent while Germany's DAX fell 2.5 percent.

In currency trading, the dollar rose against the euro and the Japanese yen.

In commodities trading, Gold plunged $72, or 5 percent, to $1,301 an ounce. The precious metal has slumped 23 percent this year as its attraction as an alternative investment has faded as the dollar and bond yields have risen.

The price of oil fell $2.21, or 2.2 percent, to $96.27 a barrel.

Among other stocks making big moves:

— Jabil Circuit fell 79 cents, or 3.7 percent, to $19.09, after the electronics manufacturer said its net income fell by half in the fiscal third quarter due to restructuring costs. Jabil's profit forecast for the current quarter also disappointed investors.

— GameStop, a video game store chain that sells new and used games, rose $1.53, or 3.8 percent, to $40.03 after Microsoft backpedaled and said that there will be no limitations on sharing games on its upcoming Xbox One gaming console.