This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

How the Fed Could Kill the Stock Market

NEW YORK (The Street) - Fund managers warn of further turmoil for global equity markets after the Federal Reserve cut its stimulus program further on Wednesday, squeezing the supply of 'easy money' to indebted emerging economies.

US equity markets dipped and ten-year Treasuries rose in response to the widely expected move, with bond purchases reduced by a further $10 billion to $65 billion a month. The action was in-line with the Fed's December statement to wind back its massive stimulus program as growth improves in the world's largest economy.

Cam Albright, director of asset allocation at Wilmington Trust Investment Advisors, noted the Fed's mention of a pick-up in household spending and business investment. "Those are core elements of GDP which will help stronger growth in future," Wilmington-based Albright said in a phone interview. 

"The economy is getting better and that will be beneficial for US financial markets, but right now, traders are concerned about the international ramifications."

Albright said the move would feed further uncertainty in global equities, which have been bolstered by global stimulus programs and rocked by recent turmoil in emerging markets. Emerging markets were not mentioned in the Fed's statement, with many mangers noting it rightly focused on the domestic economic outlook. Wilmington Trust Investment Advisor is a unit of Wilmington Trust, which has $79 billion in assets under management.

Uri Landesman, president of Platinum Management, said the move showed confidence from the central bank that the US economy could start to 'stand on its own'. But he noted stimulus had been a crucial support for equities since the global financial crisis, and expects the move to trigger further uncertainty.

"It's going to be a wild year and I think we're headed down to 1,700 (for the S&P) as the market is priced to perfection," the New York based manager said in a phone interview. Landesman said risk aversion had crept back into equities, with emerging markets to suffer further amid a likely correction for the S&P 500. Platinum Management has $1.3 billion in assets under management.

The central bank did not change its view on general improvement in the US economy, noting that "labor market indicators were mixed but on balance showed further improvement".

The S&P/500 and Dow Jones Industrial Average were in the red, but regaining losses in afternoon trade, after dipping sharply in response to the Fed's move.



-- By Jane Searle in New York

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,065.18 -6.04 -0.04%
S&P 500 1,970.44 -7.36 -0.37%
NASDAQ 4,483.9160 -21.9360 -0.49%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs