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6A Daily News – Thursday, September 22, 2011 NEW YORK (AP) — The Federal Reserve did what investors expected Wednesday — it said it would buy Treasury bonds to help the econo- my. But stocks fell any- way. The reason? The Fed made it clear that it thinks a full economic recovery is years away. The Dow Jones indus- Stocks plunge after Fed announces stimulus steps Wall Street trial average lost 283.82 points, or 2.5 percent, and closed at 11,124.84. The Standard & Poor's 500 index fell 35.33, or 2.9 percent, to 1,166.76 The Nasdaq composite fell 52.05, or 2 percent, to 2,538.19. Investors bought Trea- surys because of con- cerns about the weak economy. The yield on the 10-year Treasury note fell to a record low of 1.86 percent from late Tuesday's 1.93 percent. And the price of oil continued its slide on expectations that there'll be less demand for ener- gy because of the econo- my. Crude fell $1 to $85.92 on the New York Mercantile Exchange. The industries that fell the most Wednesday were the ones that have suffered amid worries about the economy this summer: financial and WASHINGTON (AP) — The Federal Reserve said Wednesday it will shuffle $400 billion of its portfolio to try to drive down long- term interest rates and get the economy going. But econo- mists doubted it would do much good, the stock market sold off, and the Fed itself was unusually divided over the strategy. Lowering interest rates makes it cheaper for people and companies to borrow money and spend it through- out the economy, which has industrial companies and those that sell non-essen- tials to consumers. Retailers were among the biggest losers. Wednesday's trading recalled the sharp losses the market has suffered this summer as investors feared that the country was heading toward another recession. The Fed said after a two-day meeting that it would buy long-term Treasurys and sell short- term ones to help the economy regain momen- tum. It surprised investors when it said it would include more 30- year bonds in its purchas- es than expected. ''It's being viewed as perhaps an admission that this is a longer-term issue that the U.S. econo- my is facing and not one that's going to be solved over a couple of years,'' said Oliver Pursche, pres- ident of Gary Goldberg Financial Services. The major indexes fluctuated as they often do after major Fed announcements. The losses accelerated in the last hour of trading. The Fed said it would slowed sharply more than two years after the Great Recession. Consumer spending makes up most of the nation's economic activi- ty. But rates are already at historic lows. Americans, still feeling insecure about the future, might not be will- ing to take on more debt, even at lower rates. Others see no reason to jump into the housing market when prices are still falling. Others can't get credit. ''Frankly, I don't see it buy $400 billion in 6- year to 30-year Treasurys by June 2012. Over the same period, it planned to sell $400 billion of Treasurys maturing in 3 years or less. The move is intended to drive down interest rates on long- term government debt, and could lower rates on mortgages and other loans. Those purchases are intended to send long- term rates down — Trea- sury yields fall when the bonds are in demand. The inclusion of more 30-year bonds than expected means the Fed saw the need to keep very long-term rates lower for an extended period. And that took investors by surprise, Pursche said. ''When the Fed decides to take this type of action, it's because things are serious,'' Pursche said. The Fed had some bleak remarks about the state of the economy in the statement that accom- panied its decision to buy more bonds. The Fed said the economy has ''signif- icant downside risks.'' One of those risks is the volatility in financial markets around the having any meaningful impact on the economy,'' said Bernard Baumohl, chief global economist with the Economic Outlook Group. ''What the Fed did today was a distraction.'' Yields on U.S. govern- ment debt were already among the lowest on record, and investors drove them down further after the Fed announcement. The yield on the 10-year Treasury note, an indicator for mortgages and other long-term loans, closed at 1.86 percent, down from From a TV Select weekly advertiser: "I like the fact that I get full color and repeat of my TV Select ad in the regular Tuesday Daily News at NO EXTRA COST" Eric Hammond All Star Auto Recycling General Manager All Star 10 ACRES OF INVENTORY Used Parts for Less Quality Highway 99W & Capay Road (Halfway between Corning & Orland) 22521 Capay Rd. Corning CA. 96021 If you would like information on advertising in the Select TV Magazine, call Suzy Noble @ (530) 527-2151 ext. 103 world. It also listed a number of problems that won't be easily solved: high unemployment, a depressed housing mar- ket and consumer spend- ing that is growing only at a slow pace. There are also con- cerns about problems overseas, including the debt crisis in Europe that investors believe could affect the U.S. The Inter- national Monetary Fund said Wednesday the glob- al financial system is in its most vulnerable state since the 2008 financial crisis. In a semi-annual report, the IMF said the risk to banks and finan- cial markets has grown in recent months. Stocks were already moderately lower when the Fed made its announcement shortly before 2:30 p.m. Eastern time. Within half an hour, the Dow was down 157 points. It then regained ground and fluctuated before beginning its plunge in the last 45 min- utes of trading. Investors were digesting the Fed's plan, and began to see it as a statement that the economy is weaker than many people had thought. ''That is perhaps a recognition that the Fed 1.93 percent the day before and the lowest since at least 1962. Along with the strategy statement, the Fed gave a stormy overview of the economy — slow growth, high unemployment and a slumping housing market. The Fed has already said it will keep short-term interest rates super-low into 2013, a sign that the central bank was not optimistic about the next two years. Three members of the Federal Open Market Com- mittee, the policymaking arm of the Fed, dissented. There are 10 members in all, including Chairman Ben Bernanke, and usually no more than two dissent. The three have said the Fed's policies may be raising the risk of inflation. •Weight Loss • Kickboxing • Muscle Tone • Boot Camps • Strength Training & Sport Specific Training J J & No Gym, No Problem! We come to you! or email: in.homefitness@yahoo.com Call Jacob (530) 529-0095 In Home Fitness The stock market fell quickly after the Fed announcement, which came just before 2:30 p.m. The Dow Jones industrial aver- age, which was down about 20 points before the state- ment, finished the day down 283 points, or 2.5 percent. ''It's being viewed as per- haps an admission that this is a longer-term issue that the U.S. economy is facing and not one that's going to be solved over a couple of years,'' said Oliver Pursche, president of Gary Goldberg Financial Services. The Dow closed at 11,124. It had appeared headed for 13,000 earlier this year, but investors grew wor- ried this summer that a new recession is coming, and stocks have been extremely volatile since late July. The North State's premier supplier of stoves STOVE JUNCTION The Over 25 years of experience NOW OPEN! 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''Let's face it: with a 10-year Treasury offering 1.90 percent, there's not a whole lot of room for there to be a major impact,'' said Mark Lamkin, the head of Lousiville, KY-based Lamkin Wealth Manage- ment. While initial investor reaction to the decision was negative, it's com- mon for stocks to change direction in the minutes, hours and days following an important Fed announcement, said Phil Orlando, chief equity market strategist for Fed- erated Investors. ''It's not unusual for the market to drop a per- cent or two after the deci- sion, then it may rally the next day, then it may fall again. People are con- fused, they don't really know how to settle it in,'' said Orlando. Fed does the Twist: $400B plan to help economy Wall Street had expected the Fed move for weeks, and had come to call it Operation Twist. In 1961, the Fed tried something similar and named it Oper- ation Nudge, the idea being to nudge long-term interest rates lower. Chubby Check- er's dance craze was sweeping the nation in the era of ''American Band- stand,'' and the name Oper- ation Twist stuck instead. Economists still argue about whether it worked, but most say it didn't help much. This time, the Fed will sell $400 billion from its holdings of short-term U.S. government debt — Trea- sury bills and notes that mature in three years or sooner. It will use that money to buy Treasury notes and bonds with maturities of six to 30 years. The Fed said the shift would be complete by June.