US stocks plunge

Stocks fell sharply in New York today as the Federal Reserve, shifting its stance on interest rates, signalled that an increase is coming. The Dow Jones industrials tumbled more than 140 points.

After a two-day meeting, the Fed’s Open Market Committee left rates unchanged, maintaining a 45-year low. But in a statement, the central bank dropped its previous wording that rates would be maintained for a “considerable period”.

Instead, the Fed said, “with inflation quite low ... the committee believes that it can be patient in removing its policy accommodation”.

“If you look through all the comments, they continue to describe an improving economy,” said Jack Caffrey, vice-president and equity strategist at JP Morgan Private Bank. “In the intermediate and longer term, this is constructive for equity markets, but short term, I think equity investors are likely to use this as another reason to lock in some of their profits.”

The Dow Jones industrial average finished down 141.55, or 1.3%, at 10,468.37, erasing nearly all its gains since the beginning of the year.

Broader stock indicators also fell. The Standard & Poor’s 500 index was down 15.57, or 1.4%, at 1,128.48, and the Nasdaq composite index was down 38.67, or 1.8%, at 2,077.37.

“The Fed is slowly preparing investors for an increase in rates, but the important thing to remember is that there continues to be a certain amount of slack in the economy, so this is still several months away,” said Michael Sheldon, chief market strategist at Spencer Clarke LLC.

After two months of major market gains, Wall Street is primed for at least a pause, if not a pullback, Sheldon said.

“It’ll be at least a couple of weeks, though, to see if this will mark a selloff or not,” he added.

Stocks were higher earlier despite a Commerce Department report that said orders for durable goods were flat in December, raising questions about the strength of the recovery in the manufacturing sector. Analysts had been expecting a 2% increase in orders.

Time Warner posted a profit after a loss a year ago from write-downs on its America Online unit, but the company missed analyst estimates by 1 cent per share. Shares fell 85 cents to 17.96.

Sony’s earnings fell 26% from a year ago as the entertainment and technology giant restructures its global operations, but the company gave a strong outlook for its music and consumer technology divisions. Investors responded by sending the stock 19 cents lower to 40.11.

Tenet Healthcare plummeted 2.95, or 18%, to 13.18 as the company announced it would sell one-third of its hospitals. Merrill Lynch downgraded the stock from ”neutral” to “sell”.

Procter & Gamble beat estimates by a penny on 22% earnings growth, but shares fell 67 cents to 98.51 on a disappointing first-quarter outlook.

Amazon.com fell 3.82 to 51.92 after the company reported quarterly and year-end profits after Tuesday’s close. The online retailer met analyst expectations and announced a debt buyback program.

New York Stock Exchange specialist firm LaBranche & Co, under investigation by the Securities and Exchange Commission and the NYSE for skimming profits from the shares it manages on the floor of the Big Board, posted a profit of 7 cents per share before one-time charges, beating analyst estimates by a penny. Shares were down 43 cents at 10.26.

Declining issues outnumbered advancers by a 3-to-1 margin on the NYSE. Volume was 1.63 billion shares, compared with 1.45 billion shares on Tuesday.

The Russell 2000 index of smaller companies was down 11.26, or 1.9%, at 583.91.