U.S. stocks extended losses Thursday, as investors assessed the European Central Bank's (ECB) decision to cut deposit interest rate and U.S. Federal Reserve Chair Janet Yellen's remarks on economy.
The Dow Jones Industrial Average dropped 252.01 points, or 1.42 percent, to 17,477.67. The S&P 500 lost 29.89 points, or 1.44 percent, to 2,049.62. The Nasdaq Composite Index shed 85.70 points, or 1.67 percent, to 5,037.53.
The ECB on Thursday decided to lower the interest rate of deposit facility by 10 basis points to minus 0.3 percent, with effect from Dec. 9, 2015. The interest rate on the main refinancing operations and the interest rate on the marginal lending facility will remain unchanged at 0.05 percent and 0.3 percent respectively.
The ECB also decided to extend the asset purchase program (APP), originally intended to last until September 2016, to the end of March 2017. "The monthly purchases of 60 billion euros (65 billion U.S. dollars) under the APP are now intended to run until the end of March 2017," said Mario Draghi, president of the ECB at a press conference following the governing council meeting.
The stimulus measures, however, appeared less aggressive than markets had expected. Analysts had anticipated a deeper cut to interest rates and had expected an increase in its asset purchase program.
Meanwhile, U.S. Federal Reserve chairwoman Janet Yellen on Thursday gave an upbeat assessment of the U.S. economy before lawmakers, signaling that an interest rate hike is likely in December.
Yellen's testimony before the Joint Economic Committee of the U. S. Congress on Thursday is roughly identical to her speech on Wednesday. On both occasions, Yellen repeated that "U.S. economic growth is likely to be sufficient over the next year or two to result in further improvement in the labor market" and her confidence in a return of inflation to the central bank's 2 percent target.
Although the Fed chair did not indicate whether to raise interest rates this month or not, she mentioned that the economy is performing as expected, signaling the conditions necessary for an interest rate increase have been met.
On the economic front, in the week ending Nov. 28, the advance figure for seasonally adjusted initial jobless claims was 269,000, an increase of 9,000 from the previous week's unrevised level of 260,000, said the U.S.
Labor Department Thursday. The U.S. non-manufacturing index registered 55.9 percent in November, 3.2 percentage points lower than the October reading of 59.1 percent, the Institute Supply Management reported Thursday.
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