The S&P 500 index declined for the first time in 2010 after the People’s Bank of China’s unexpected announcement to raise the reserve requirements for commercial banks.
The bank also announced today that it raised its one year treasury bill yield by 8 basis points to 1.84 percent.
The move dampens the hopes of an Asian-led global economic recovery as the Chinese government, concerned with inflation and a possible housing bubble, tightens credit.
The S&P 500 index dropped -0.94%. The biggest losers on the index were MetroPCS, a wireless communications provider, and Alcoa, which reported disappointing earnings yesterday after the market closed. The Dow closed down 0.34% to 10,627.26 and Nasdaq lost 1.3% to 2,282.31.
Oil declined for the second straight day on the weakened economic outlook. It fell 3.04% to $80. The 10 year U.S. Treasury Index gained 0.91% today and the Japanese yen gained against the dollar and euro as investors retreated to safer assets.
Data on US inflation are scheduled to be released on Thursday and Friday, and the European Central Bank will hold its first press conference of 2010 this Thursday.