Fed Chair Janet Yellen kept interest rates on hold Thursday and sounded caution over slowing growth in China.

(Bloomberg) — U.S. stocks slumped as investors speculated the Federal Reserve’s refusal to raise interest rates bespeaks larger concerns about the strength of the global economy.

The Standard & Poor’s 500 Index lost 1.1 percent to 1,968.98 at 10:07 a.m. in New York. The gauge pared its gain for the week to 0.4 percent. The Dow Jones Industrial Average dropped 221.61 points, or 1.3 percent, to 16,453.13.

“Some investors wanted them to rip the Band-Aid off and get the first one done. Then we wouldn’t have to obsess about it for the two weeks before each meeting,” said Eric Green, director of research and senior managing partner at Penn Capital, which oversees $4 billion in Philadelphia. “There’s some concern that the Fed sees something we’re not seeing in the data.”

Some futures and options on stocks and indexes expire today in a process known as quadruple witching, which may increase stock volatility. The operator of the S&P 500 will also rebalance the index in a quarterly move to adjust member weightings. About $41 billion of shares will be traded as investors buy and sell stocks to mimic the changes, according to a Sept. 8 estimate by Howard Silverblatt, an index analyst at the New York-based S&P Dow Jones Indices.

Fed Chair Janet Yellen kept interest rates on hold Thursday and sounded caution over slowing growth in China. While she said most policy makers still expect a rate increase this year, central bank officials said in a statement that “recent global economic and financial developments may restrain economic activity somewhat and are likely to put further downward pressure on inflation in the near term.”

Traders are now betting on the outcomes of the Fed’s October and December meetings — odds of a move higher are 20 percent and 44 percent, respectively.

“Markets are sensing that the Fed is not only worried about the U.S. economy, but also global growth,” said Pedro Ricardo Santos, a broker at X-Trade Brokers DM SA in Lisbon. “There are very real reasons for concern on this front. Without doubt things have changed. The Fed would have to hike in 2016.”

Reports due next week on home sales and durable goods orders might help gauge the state of the U.S. economy. The Conference Board’s index of leading economic indicators, a measure of the outlook for the next three to six months, rose 0.1 percent in August, below economists’ forecasts for a 0.2 percent advance.

Equity markets have been turbulent amid concerns about a China slowdown and the Fed’s intentions. The Chicago Board Options Volatility Index endured its biggest weekly gain on record in August, and has closed above 20 for 19 straight sessions, the longest stretch since June 2012. The VIX jumped 7.9 percent to 22.80 today.

“We’re going to continue to have periods of volatility in this market,” Penn Capital’s Green said. “The moves we’re seeing could easily be profit-taking from a very big run we’ve had over the last week and a half. We have options expirations today which is going to cause volatility.”

All 10 major groups in the S&P 500 declined, with energy shares tumbling 2.1 percent. Raw-materials and financial companies slid more than 1.7 percent. Utilities, which tend to attract investors in a low interest rate environment, had the best performance, trading little changed.

“I think we’ll see more of the themes from yesterday afternoon. The playbook from 3:00 to 4:00 was to buy interest rate-sensitive areas and sell banks,” said Walter Todd, who oversees about $1.1 billion as chief investment officer for Greenwood Capital Associates in South Carolina. “All of that is a fairly straightforward playbook if you knew what was happening.”

Goldman Sachs Group Inc., Morgan Stanley and JPMorgan Chase & Co. declined more than 2.6 percent. ConocoPhillips and Schlumberger Ltd. lost more than 1.7 percent as oil prices slumped a second day.

–With assistance from Sofia Horta e Costa in London.

 

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