* Stocks fall; 10-year Treasury yields hit 60-year lows
* Fed launches $400 billion program to aid economy
* Fed noted significant downside risks to growth
(Updates with Fed decision)
By Wanfeng Zhou
NEW YORK, Sept 21 U.S. stocks fell on Wednesday
and benchmark Treasury yields dropped to their lowest in over
60 years after the Federal Reserve launched a new $400 billion
program to aid the U.S. economy, but said the economic outlook
The U.S. dollar rose broadly after the Fed announcement,
reversing losses against the euro. The Fed's measures will not
lower the value of the greenback because the action will not
require printing of new dollars, analysts said.
The Fed's program is designed to put more downward pressure
on long-term interest rates over time and help the battered
The U.S. central bank will tilt its $2.85 trillion balance
sheet more heavily to longer-term securities by selling
shorter-term notes and using those funds to purchase
longer-dated Treasuries. It will also reinvest proceeds from
maturing mortgage and agency bonds back into the mortgage
market For details, see [ID:nS1E78J25W]
On Wall Street, the Dow briefly turned positive after the
Fed statement before turning sharply lower.
The Fed spooked investors with its comment on the economy.
The Fed, in its policy statement issued after the close of its
two-day meeting, said, "There are significant downside risks to
the economic outlook."
"That headline of economic outlook -- I don't know why
people are surprised to read that -- but it seems to be what
people are fixated on and that is what is driving the market
lower," said Stephen Massocca, managing director at Wedbush
Morgan in San Francisco.
The Dow Jones industrial average .DJI was down 99.30
points, or 0.87 percent, at 11,309.36. The Standard & Poor's
500 Index .SPX was down 12.08 points, or 1.00 percent, at
1,190.01. The Nasdaq Composite Index .IXIC was down 0.71
points, or 0.03 percent, at 2,589.53.
The MSCI world equity index .MIWD00000PUS slipped 1.2
The euro last traded down 0.3 percent at $1.3667 EUR=,
while the dollar rose 0.2 percent to 76.53 yen JPY=EBS
"Medium- and short-run, this policy will have little impact
on the economy and even less impact on the dollar," said Joseph
Trevisani, chief market analyst at FX Solutions in Saddle
River, New Jersey. "This is what was expected."
Benchmark 10-year note yields US10YTRR fell to new
60-year lows of 1.87 percent, down from 1.95 percent before the
(Editing by Leslie Adler)