Wall Street drops as focus turns to US affairs

Stocks on Wall Street fell sharply after the US Federal Reserve made a fresh attempt to bolster the faltering US economy.

The Fed said it would increase its share of longer-term Treasury bonds by $US400 billion by June 2012 in an effort to make credit cheaper and spur spending and investment.

Investors took a sceptical position on how successful such a move might be, and how much impact it would have on the economy.

The Dow Jones Industrial Average immediately fell 138 points, or 1.2%, to 11,270. By the close (8AM NZ time), the selloff had gathered pace with the index ending down 283.82 points, or 2.5%, at 11,124.84.

The S&P 500 index slumped 2.9% to 1166.69 while the Nasdaq Composite 3.0% at 2538.19 after earlier being ahead on a strong result from Oracle and a management change at Hewlett-Packard.

Gold futures fell nearly 1% to $US1790 an ounce while crude oil futures slumped to trade just below $US86 a barrel.

Bank of America dropped 4.5% after Moody's Investors Service downgraded the credit rating several notches to Baa1 while Caterpillar fell 4.3% after reporting slower sales growth in most regions.

Hewlett-Packard rose 8.4% after saying it was looking for a successor to chief executive officer Leo Apotheker and Oracle rallied 6.6% after its first-quarter results came in at the high end of forecasts.

In economic news, existing-home sales rose a better than expected 7.7% to an annual rate of 5.03 million in August, its highest level in five months.

Other markets: Europe lower, Asia higher
The Stoxx Europe 600 finished down 1.7% at 225.33 as the lack of an announcement of a deal on Greek financing worried investors that recent progress was slowing.

The French CAC 40 index fell 1.6% to close at 2935.82, the German DAX 30 index fell 2.5% to settle at 5433.80 while London’s FTSE 100 index fell 1.4% to end at 5288.41,

In Asia, Hong Kong's Hang Seng Index fell 1% to 18,824.17, while the more volatile Shanghai Composite Index jumped 2.7% to 2512.96.

The Nikkei Stock Average rose 0.2% to 8741.16 in Tokyo, the S&P/ASX 200 index advanced 0.8% to 4071.80 in Sydney, India's Sensex fell 0.2% to 17,065.15 and the Korean Kospi climbed 1% to 1854.28.

Commodities: Oil, gold slump on Fed move
Crude futures dropped $US1 a barrel in a choppy trading after the Fed announced plans to boost the listless US economy.

Light, sweet crude for November delivery settled down $US1, or 1.15%, to $US85.92 in New York. Brent crude on the ICE Futures Europe exchange, which had been trading higher for most of the day, settled down 18USc, or 0.16%, to $US110.36 a barrel.

Gold futures slipped after the Fed said it would reshuffle its portfolio, curbing demand for the metal as a safe place to park cash.

Gold for September delivery was down $US17, or 0.9%, at $US1789.60 an ounce in post-settlement electronic trading. The contract was down 0.1% at $US1805.50 at the close of floor trading.

Currencies: US dollar falls
The dollar was mostly lower as investors prepared for the conclusion of the Federal Reserve's policy meeting.

As expected, the Fed swapped shorter-dated government securities for longer-dated ones in an effort to jump-start a moribund US economy.

Meanwhile, minutes of the Bank of England's September meeting showed members there were considering more quantitative easing.

The euro was at $US1.3727 compared with $US1.3701 late on Tuesday. The dollar was at ¥76.38 compared with ¥76.45, while the euro was at ¥104.84 compared with ¥104.76.

The UK pound fetched $US1.5626 from $US1.5735, while the dollar bought 0.8936 Swiss franc from 0.8877 franc.