Stock market, commodities plunge

Market Snapshot for September 22, 2011 (12:32 am ET):

  • Closing Prices: DOW 10,733.83 (-391.01, -3.51%),S&P 500 1,129.56 (-37.20, -3.19%), NASDAQ 2,455.67 (-82.52, -3.25%), Nikkei 225 8,560.26 (-180.90, -2.07), DAX 5,164.21 (-269.59, -4.96%), FTSE 5,041.61 (-246.80, -4.67%)
  • OIL 80.70, GOLD 1,742.20, SILVER 36.11
  • EURO 1.3476, YEN 76.31, BRITISH POUND 1.5361, U.S. DOLLAR INDEX 79.10

Commodities Collapse While Indexes Plummet

There were very few pockets of strength in Thursday's session and most bulls came away from the day sorely disappointed (assuming there are any bulls left given the grim forecasts plastered everywhere you turn). The U.S. dollar, however, was one of those pockets. The market was already weakening once again as the two-day FOMC meeting kicked off on Tuesday, but the selling didn't hit full force until following the Fed's afternoon policy statement on Wednesday.

Most notable in the Fed's statement was its plan to keep interest rates low for "an extended period" due to continued "significant downside risk" for the economy, in addition to "strains in the global financial markets". The statement hit hard as a Fed downgrade on the economy with a far-reaching impact on the markets.

Dubbed "Operation Twist", the Fed's plan aimed at spurring growth in housing and other areas of the economy entails buying $400 billion in Treasuries with long-term maturities while selling $400 billion in those with short-term ones. The 10-year Treasury yield fell from 1.875% on Wednesday to 1.715%. Meanwhile, the 30-year Treasury yield dipped below 3% for the first time. Mortgage rates have also continued to fall and are hovering at 60-year lows just shy of 4% for a 30-year fixed-rate with speculation of even further downside. Demand, however, remains elusive and qualifying for those mortgages is increasingly difficult.

Dow Jones Industrial Average (Figure 1)

In recent years, gold has strengthened as the market weakened, but this relationship falls apart when concerns of global weakness spread and investors turn to cash. The U.S. dollar climbed to 7-month highs, while gold accelerated its pullback off all-time highs. Gold for December delivery fell $66.40 and settled at $1,741.70 an ounce on the Comex at the New York Mercantile Exchange. Silver also took a pounding, plummeting nearly 10% to $36.58 an ounce. The U.S. dollar index rose 0.8%.

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