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Stock Prices Plunge Amid Federal Reserve's Third Credit Tightening in Three Months

Strategic Insights

— 2 min read

Stock prices continued their downward trend Monday, with the Dow Jones industrial average plummeting 35.40 points to 3626.07 as the Federal Reserve announced its third credit tightening in three months. The trading day was marked by a sharp increase in declines over advances, with 1,233 issues falling compared to 646 gaining, among the 2,486 issues crossing the NYSE tape. Trading volume was about 96,810,000 shares, a decline from the previous day's 103,910,000 shares, which was inflated by program trading related to the 'double-witching hour'. The Treasury bond market also suffered, with the 30-year bond falling 30/32 to 86 18/32, while the dollar recovered slightly against the German mark and Japanese yen.

Key Takeaways:

  • The Dow Jones industrial average fell 35.40 points to 3626.07, the lowest level since the previous Friday's 1.78-point decline.
  • The Federal Reserve's third credit tightening in three months triggered a sharp decline in stock prices, with 1,233 issues falling compared to 646 gaining.
  • Trading volume declined to 96,810,000 shares, down from 103,910,000 shares on the previous day.
  • The Treasury bond market suffered, with the 30-year bond falling 30/32 to 86 18/32, while the dollar recovered slightly against the German mark and Japanese yen.
  • Joseph Barthel, director of investment strategy at Fahnestock & Co., attributed the market's response to the Federal Reserve's action as "somewhat muted compared to the previous tightening", but warned that the "selling could just feed on itself".
  • The Federal Reserve's statement that it would increase slightly the degree of pressure on reserve positions was seen as a small but significant increase in short-term money interest rates.

Statistics:

  • The Dow Jones industrial average fell 35.40 points to 3626.07.
  • 1,233 issues fell compared to 646 gaining among the 2,486 issues crossing the NYSE tape.
  • Trading volume was about 96,810,000 shares, down from 103,910,000 shares on the previous day.
  • The 30-year Treasury bond fell 30/32 to 86 18/32, while the dollar recovered slightly against the German mark and Japanese yen.
  • The 30-year Treasury bond yield rose to 7.37 percent, up from 7.29 percent on the previous day.

Sources:

  • "Stock Prices Plunge Amid Federal Reserve's Third Credit Tightening in Three Months" by NEWLN (no date mentioned)
  • "Federal Reserve Statement" (no date mentioned)
  • "Fahnestock & Co." (no date mentioned)

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