US stocks sink on emerging markets turmoil, Fed stimulus cut

US stocks fell sharply Wednesday on worries over turbulence in emerging markets, a decline that steepened after the US Federal Reserve cut back its monetary stimulus for the second straight month. The Dow Jones Industrial Average slumped 189.77 points (1.19 percent) to 15,738.79. The broad-based S&P 500 fell 18.30 (1.02 percent) to 1,774.20, while the tech-rich Nasdaq Composite Index declined 46.53 (1.14 percent) to 4,051.43. Michael James, managing director of equity trading at Wedbush Securities, said the Turkish central bank's  doubling of its benchmark interest rate took investor concerns "to another level", prompting the retreat from stocks and other risky assets. A similar move in South Africa also failed to stem the erosion of its currency. After European stocks slumped, US stocks opened in the red and dropped further after the Fed announced that it will reduce asset purchases by another $10 billion in February to $65 billion, a decision that was widely expected. "People are edgy," primarily because of the uncertain outlook on emerging-market economies, said Peter Cardillo, chief market economist at Rockwell Global Capital. He said the Fed's move, as well as a mixed bag of earnings reports, were smaller factors in the sell-off. Dow component Boeing sank 5.3 percent after it forecast essentially flat earnings in 2014 due to modest increases in commercial airplane deliveries and lower revenues from US defense orders. AT&T fell 1.2 percent amid concerns that the company's outlook for cash flow had been cut. Morgan Stanley rated the company's lofty payouts to shareholders a "wide concern." Citigroup, which has a comparatively large presence in emerging markets, fell 3.1 percent on concerns about the outlook in these economies. JPMorgan Chase and Bank of America lost just 0.4 percent and 0.3 percent, respectively. Yahoo tumbled 8.7 percent after reporting a six percent drop during the fourth quarter in display ad revenue that has long been at the core of Yahoo's income. Dow Chemical shot up 3.9 percent after earnings of 65 cents per share bested the 43-cent analyst forecast. The company announced a 15 percent dividend increase and an expansion to its share buyback program from $1.5 billion to $4.5 billion. Bond prices rose sharply. The yield on the 10-year US Treasury fell to 2.68 percent from 2.75 percent Tuesday, while the 30-year declined to 3.62 percent from 3.67 percent. Bond prices and yields move inversely.