Dow Jones posts worst day of 2013 after Federal Reserve indicates it will end bond-buying program which has kept the US economy afloat



The Dow Jones closed at 14,758 points on Thursday



Global shares have plummeted after news broke of the scaling back

While stocks and commodities took a pounding, the dollar surged

There was no let-up in the flight from stocks and bonds as traders reacted to news that the Federal Reserve could end its massive bond-buying program next year and China's manufacturing slowed.

The Dow Jones industrial average plunged 353 points, or 2.3 per cent, to close at 14,758 points on Thursday, its worst day of 2013.



The Dow has lost 560 points in the past two days, wiping out its gains from May and June.

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Downward slide: The Dow posted its worst day of 2013 on Thursday after the Federal Reserve said it could end its huge bond-buying program by the middle of next year

The Standard & Poor's 500 dropped 40 points, or 2.5 per cent, to 1,588. The Nasdaq fell 78 points, or 2.3 per cent, to 3,364 points.

The price of gold dropped and bond yields rose sharply.

Stocks fell across the board. Twenty stocks fell for every one that rose on the New York Stock Exchange. Trading was very heavy at 4.8 billion shares.

The breadth of the sell-off was seen across global financial markets, from sharply lower stock markets in Asia to falling government bond prices in Europe and the U.S.

A Fed policy statement and comments from Chairman Ben Bernanke started the selling in stocks and bonds on Wednesday.

Mr. Bernanke said the Fed expects to scale back its massive bond-buying program later this year and end it entirely by mid-2014 if the economy continues to improve.

The bank has been buying $85 billion a month in Treasury and mortgage bonds, a program that has kept borrowing costs near historic lows for consumers and business. It has also helped boost the stock market.

Slump: The Dow Jones plunged 353 points, or 2.3 per cent, to 14,758 points on Thursday

Alec Young, a global equity strategist at S&P Capital IQ, said investors weren’t expecting Mr. Bernanke to say the program could end so quickly, and are adjusting their portfolios in anticipation of higher U.S. interest rates.

'What we’re seeing is a pretty significant sea-change in investor strategy,' Mr. Young said.

As financial markets dropped, investors likely put the proceeds of their sales in cash as they waited for the dust to settle, said Quincy Krosby, a market strategist at Prudential Financial.

Investors 'are raising cash right now, for fear the deterioration will continue,' said Mr Krosby.

Freefall: The Dow was relatively stable before losing 560 points in the past two days, wiping out its gains from May and early June

The S&P 500 extended Wednesday’s slide, losing 34 points, or 2.1 per cent, to 1,595 at 2.47 pm.

The Dow was down 338 points, or 1.9 per cent, to 14,875. The Nasdaq composite fell 72 points, or 2.1 percent, to 3,369.

The Russell 2000 index, which contains small-company stocks, slumped 21 points, or 2.1 percent, to 965. The index closed at a record high of 999.99 points Tuesday.

The yield on the 10-year Treasury note rose to 2.43 percent, from 2.35 per cent Wednesday.

The yield, which rises as the price of the note falls, surged 0.25 percentage point Wednesday after the Fed’s comments. It’s up sharply since May 3, when it hit a year low of 1.63 percent.

Change of fortunes: The Dow has climbed since last year but dropped dramatically this week