Stocks plunge on Wall St as budget deal fuels taper fears

The S&P 500 has sunk below the key 1600 level, after news broke of a provisional budget agreement in Washington.

Just when I thought the stock market was starting to get over its stimulus habit, we see evidence that investors are still very much in its thrall, sensitive to the threat of the tap being tightened sooner rather than later.

The leading US stock index benchmarks were languishing near the lows of the day by early afternoon in New York, depressed by anxiety that a budget deal agreed by lawmakers in Washington might precipitate the introduction of a taper by the Fed.

The Dow was down 0.51% or 80 points at 15,892, while the S&P 500 lost 0.75% to drop down to 1789.2. The 1800 level was successfully defended by the bulls yesterday, but it has been well breached today, with the budget deal yet another obstacle cleared in the path towards a December taper.

The Fed statement from the October meeting acknowledged that ‘fiscal policy is restraining economic growth’ but the accord reached in principle in Congress goes someway to blowing away the gloomy clouds of another potential government shutdown.

Interestingly, the growing speculation that the Fed could implement a reduction in stimulus as soon as next week has not boosted the US dollar much. The dollar lost ground against the yen and the euro, although it strengthened substantially versus the Australian dollar and against the pound.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Find articles by analysts

This information has been prepared by IG, a trading name of IG Markets Limited and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. International accounts are offered by IG Markets Limited in the UK (FCA Number 195355), a juristic representative of IG Markets South Africa Limited (FSP No 41393). South African residents are required to obtain the necessary tax clearance certificates in line with their foreign investment allowance and may not use credit or debit cards to fund their international account.

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 79% of retail investor accounts lose money when trading CFDs with this provider.
You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.