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Why Citigroup Got Hammered This Week

John Grgurich
June 21, 2013

About three hours into the week's final day of trading, Citigroup (NYSE: C) stock is down a staggering 6.80%. There's no mystery as to what's behind the plummet, as well as the rest of the market's demise this week: a little thing Ben Bernanke likes to call "tapering."

The Fed giveth, and the Fed taketh away
In case you missed it, here's the overview: On Wednesday, the Federal Reserve chairman announced his plan to taper quantitative easing, the bond-buying program investors have come to mentally rely on as they've piled more and more money into the stock market.

So long as the economy continues to improve, the pace of bond-purchases will begin to slow later this year, with a target of mid-2014 for a complete halt to buying. By then, the rate of unemployment is projected to be down to 7%. Finally, interest rates will be kept low until unemployment drops to 6.5%.

Foolish bottom line
With this announcement, markets of all kinds all over the world have been freaking out: Equity markets have tumbled, bond yields are rising, and commodity prices are dropping. Here at home, the S&P 500 is down 3.24% for the week, the Dow Jones Industrial Average is down 2.98%, and the Nasdaq is down 3.29%.

Of course, no one should be surprised at the Fed's move. Bernanke's been talking about tapering for months, without announcing any firm plans. I think it's obvious he's been trying to prepare investors for the inevitable: that QE had to end sometime, and that time is now. Although that isn't even the case: Tapering will only begin later this year, and then only if the economic data remains positiv