- Taper in focus ahead of Fed decision
- Analysts show concerns with EM rate hikes
- Boeing and Yahoo! slump after results, Dow Chemicals rises
Dow Jones: -0.73%
S&P 500: -0.62%
Just as sentiment began to recover following the emerging markets-led sell-off at the end of last week, US markets opened with sharp losses on Wednesday as investors showed caution ahead of the Federal Reserve policy meeting which comes to a close later this evening.
Meanwhile, investors were reacting to a 0.2% decline in US mortgage applications last week, along with a mixed batch of earnings from heavyweights Boeing, Yahoo! and Dow Chemical.
The Fed, which began tapering its stimulus programme last month by cutting monthly asset purchases from $85bn to $75bn, is widely expected to cut another $10bn today.
Positive effects of rate hikes begin to fade
Stocks in Europe had started the day on the front foot earlier on after Turkey hiked interest rates to halt a slide in the lira which sunk to a record low against the dollar
on Monday. India and South Africa also followed suit in an effort to ensure price stability.
However, the initial positive effects from the rate increases quickly faded with the lira in particular erasing earlier gains against the greenback, as analysts warned of the negative impact that policy tightening would have on the economy.
"While the rate hike has helped stem lira weakness in the short term, it increases the chances of slower growth and a domestic credit crunch in the medium term," said analysts at RBS. They said that the decision highlights the "dilemma" being faced by other emerging-market central banks.
European indices were pressured firmly into the red ahead of the US opening bell.
Boeing, Yahoo, Dow Chemical
Aerospace firm Boeing beat forecasts for the fourth quarter with earnings rising 26% to $1.2bn on revenues which were up 7% at $23.8bn, but shares
fell sharply after the company's guidance for 2014 disappointed.
Internet giant Yahoo! dropped sharply after the company reported a drop in net sales in the fourth quarter and warned of slowing growth amid competition from Google and Facebook. Other tech stocks such as Apple, Intel and Facebook were also lower this morning.
Dow Chemical surged after beating fourth-quarter earnings forecasts, raising its dividend and increasing its share buyback programme.
Biogen Idec advanced after posting fourth-quarter profit that beat surpassed forecasts.
Medivation edged up after saying its prostate-cancer drug Xtandi slowed cancer in 59% of patients in a study.
T-Mobile US dropped following reports that Sprint Corp. would face resistance from antitrust officials to a potential acquisition of the company.