US stocks tumble as Fed decision weighs

NEW YORK (AFP) - US stocks fell sharply Friday in the wake of the Federal Reserve's decision against raising interest rates because of worries about slowing global economic growth.

The Dow Jones industrial Average dropped 289.95 (1.74 per cent) to 16,384.79.

The broad-based S&P 500 sank 32.12 (1.61 per cent) to 1,958.08, while the tech-rich Nasdaq Composite Index lost 66.72 (1.36 per cent) at 4,827.23.

Analysts said the Fed's decision Thursday to keep benchmark rates at zero was concerning because it implied that headwinds facing the global economy are stronger than thought.

Also, the US central bank's failure to act despite previously suggesting a rate hike was imminent left investors uncertain of the outlook for US monetary policy.

"The fact that the Fed did not raise rates prolongs the uncertainty and the stock market does not like uncertainty," said Bill Lynch, director of investment, Hinsdale Associates.

"We just face more of the same in terms of this waiting game as to when they'll finally pull the trigger."

All 30 members of the Dow ended lower, with especially big drops at Caterpillar (minus 3 per cent), Merck (minus 3.4 per cent) and ExxonMobil (minus 2.4 per cent).

Banking stocks fell sharply, with Citigroup losing 2.6 per cent and Dow members JPMorgan Chase and Goldman Sachs shedding 2.7 per cent and 3 per cent, respectively.

Biotech stocks were another weak sector. Biogen fell 3.3 per cent, Celgene shed 2.5 per cent and Gilead Sciences lost 2.8 per cent.

Dow member Coca-Cola fell 1 per cent on news US tax officials told the soda company it owed US$3.3 billion (S$4.6 billion) in taxes. Coca-Cola said it would contest the government's case.

Software company Adobe Systems rose 1.2 per cent after third-quarter profit more than tripled to US$174.5 million.

Hotel chain La Quinta Holdings sank 15.4 per cent after announcing that Wayne Goldberg would step down as chief executive. The board appointed chief financial officer Keith Cline interim CEO.

Metals producer Freeport-McMoRan slumped 9.7 per cent after it completed an equity offering of US$1 billion and revealed plans to sell an additional US$1 billion worth of shares.

Bond prices rose. The yield on the 10-year US Treasury fell to 2.13 per cent from 2.2 per cent Thursday, while the 30-year dropped to 2.93 per cent from 3.01 per cent. Bond prices and yields move inversely.