NEW YORK | U.S. stocks dropped in midday trading Friday after the Federal Reserve’s decision to hold off raising interest rates. Investors interpreted the move as a signal that the global economy is weak. Bonds rose and the price of oil fell, pushing down energy stocks. Financial stocks, which would benefit from higher rates, also dropped.
KEEPING SCORE: The Dow Jones industrial average fell 220 points, or 1.2 percent, to 16,451 as of 12:52 p.m. Eastern time. The Standard & Poor’s 500 dropped 23 points, or 1.2 percent, to 1,967 and the Nasdaq composite declined 44 points, or 0.9 percent, to 4,849.
THE FED: The Federal Reserve decided Thursday to keep interest rates at record lows, citing low inflation, weakness in the global economy and unsettled financial markets. Investors appear to have interpreted the decision to mean that the Fed thinks the slowdown in China and other emerging markets is signaling a much weaker global economy. The Fed meets again next month and in December.
THE QUOTE: “If growth in the strongest economy — the United States — isn’t strong enough to raise rates even a quarter of point, what does that say about the prospects for global growth?” said Bill Strazzullo, chief strategist at market research firm Bell Curve Trading.
BUYING BONDS: Bonds in Europe rallied as investors sought safety, with Spanish, Italian and British 10-year notes all jumping. U.S. bonds also rose. The benchmark 10-year Treasury note gained, pushing down its yield to 2.15 percent.
EUROPE SLUMPS: Germany’s DAX was down 3 percent while the CAC-40 in France fell 2.6 percent. Britain’s FTSE 100 was 1.3 percent lower.
PLANE PROBLEMS: Aviation equipment manufacturer Rockwell Collins slumped after the company’s sales forecast for next year came in lower than analysts’ forecasts. The company cited weak demand for business and regional jets. Its stock fell 93 cents, or 1.1 percent, to $84.35.
BANK BLUES: JPMorgan Chase fell $1.65, or 2.6 percent, to $61 as investors judged that lower interest rates for longer mean banks won’t be able charge more for loans. Citigroup slumped $1.13, or 2.2 percent, $50.50.
CURRENCIES: The euro was down 0.2 percent at $1.1378. The dollar dropped against the Japanese yen, trading 0.5 percent lower at 119.83 yen.
OIL DOWN: The price of U.S. crude fell $1.70 to $45.22 a barrel on concerns over the slowing global economy. Brent crude, the main contract for international oils, fell $1.14 at $48.72.