* Fed to reduce stimulus by another $10 billion per month
* South Africa raises rates for first time in six years
* Boeing, Yahoo shares fall after results
* Dow down 1.2 pct; S&P 500 down 1 pct; Nasdaq off 1.1 pct
By Caroline Valetkevitch
NEW YORK, Jan 29 U.S. stocks dropped more than 1
percent on Wednesday, hitting session lows after the Federal
Reserve stuck with its plan to scale back stimulus even in the
midst of emerging market turmoil.
Trading was volatile after the Fed's move, which further
reduces its monthly bond purchases by $10 billion a month.
Declines were fairly broad-based, with nine of the 10 S&P 500
sector indexes ending lower. Shares of Boeing Co ranked
among the biggest drags on both the Dow and the S&P 500.
Overall improvement in the U.S. economy suggested the
central bank would continue to cut the purchases, but some
investors had speculated in recent days that the Fed might
rethink its plan because of the emerging market problems.
"I think investors had hoped that the Fed would somehow
respond to the recent turbulence and show they had their back,"
said Jack Ablin, chief investment officer of BMO Private Bank in
But the Fed really wants "to move to the sidelines here and
get out of the QE business."
In its announcement, the Fed said it would buy $65 billion
in bonds per month starting in February, down from $75 billion
now. In what was Fed Chairman Ben Bernanke's last policy-setting
meeting, the central bank also maintained its longer-term plan
to keep U.S. interest rates low for some time to come.
The Dow Jones industrial average fell 189.77 points
or 1.19 percent, to end at 15,738.79. The S&P 500 lost
18.30 points or 1.02 percent, to finish at 1,774.20. The Nasdaq
Composite dropped 46.529 points or 1.14 percent, to
close at 4,051.434.
The CBOE Volatility Index or VIX, Wall Street's
barometer of fear, jumped 9.81 percent to end at 17.35.
The benchmark S&P 500 has lost ground in four of the past
five sessions as fears over slowing growth in China and large
capital outflows from developing markets prompted investors to
seek safe-haven assets.
The Fed's quantitative easing program has supported not just
the U.S. economy but overseas economies as well by increasing
liquidity, so cutting the stimulus has been a big factor in the
emerging markets' selloff.
Stocks were lower early in the session even after bold
efforts by Turkey and South Africa to stabilize their
South Africa's central bank raised interest rates for the
first time in six years. Its move followed a dramatic rate hike
by Turkey's central bank late Tuesday, designed to defend its
Boeing's stock fell 5.3 percent to close at $129.78, though
the company reported a surge in quarterly profit.
Yahoo shares dropped 8.7 percent to end at $34.89,
a day after it reported a decline in online ad prices that hurt
its revenue for a fourth consecutive quarter.
Among other profit reports, Dow Chemical Co posted
a quarterly profit that was well ahead of expectations. It also
raised its dividend 15 percent and expanded its stock-buyback
program. Dow Chemical's stock rose 3.9 percent to end at $44.73.
Volume was higher than average for the month. About 7.5
billion shares changed hands on U.S. exchanges, compared with
the average of 6.8 billion so far this month, according to data
from BATS Global Markets.
Decliners outnumbered advancers on the New York Stock
Exchange and the Nasdaq by slightly more than 3 to 1.