The US markets suffered a sharp plunge on Wednesday, after the Federal Reserve moved to lower interest rates on consumer loans with a $400 billion debt-swap program that was widely expected. Fed stated that strains in global financial markets were among risks to the economic outlook. Also, a downgrade of several Italian bank ratings by Standard & Poor’s kept alive investor concerns over Europe’s sovereign-debt situation.
Fed policy makers stated that they would replace short-term debt in the central bank’s portfolio with longer-term Treasury bonds in a bid to further cut borrowing costs. The central bank, also reiterated to keep rates at historic lows near 0% through mid-2013, and stated that it was acting in view of significant downside risks to the economic outlook, including strains in global financial markets. The Fed also would reinvest principal payments from its holdings of mortgage-related securities, a move designed to help mortgage markets.
Early in the session, stock indices briefly added some gains after an industry report illustrated a surge in existing-home sales, with the National Association of Realtors reporting a 7.7% rise in August.
The Dow Jones industrial average lost 283.82 points, or 2.49 percent, to 11,124.80. The Standard and Poor's 500 closed lower by 35.33 points, or 2.94 percent, to 1,166.76, while the Nasdaq composite lost 52.05 points, or 2.01 percent, to 2,538.19.
The Indian ADRs closed in red on Wednesday, Infosys Technologies was down by 0.95%, HDFC Bank was down by 0.78%, Tata Motors was down by 0.55%, Dr. Reddy’s Lab was down by 0.41% and Sterlite Industries was down by 0.41%.
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