Category: Markets / Finance / February 20, 2013 6:21 PM EST
U.S. stocks fell the most in three months and a key gauge of market volatility spiked on Wednesday (February 20) after minutes from the U.S. Federal Reserve's most recent meeting suggested the central bank may slow or stop buying bonds sooner than expected.
The minutes from the Fed's January meeting showed many officials voiced concern last month over potential costs of more asset purchases, suggesting that the program, known as QE, may slow before the pickup in hiring it was intended to deliver.
In a sign of broad market weakness, the number of declining stocks outnumbered advancers by a ratio of more than 3 to 1 on both the New York Stock Exchange and the Nasdaq. The volume of traded shares hit its second-highest level this year.
Prominent stocks in a range of sectors booked sharp losses after disappointing earnings and outlooks, including homebuilder Toll Brothers, fertilizer maker CF Industries and oil and gas producer Devon Energy Corp.
A slide in the commodity sector also weighed on stocks. Spot gold dropped to the lowest level since July, benchmark industrial metal copper fell to a one-month low, and U.S. crude oil futures shed more than $2 (USD) a barrel.
On Wall Street, the Dow Jones industrial average dropped 108.13 points, or 0.77 percent, to 13,927.54 at the close. The Standard & Poor's 500 Index fell 18.99 points, or 1.24 percent, to 1,511.95. The Nasdaq Composite Index lost 49.19 points, or 1.53 percent, to end at 3,164.41.
For the benchmark S&P 500, the day's decline was the largest since Nov. 14.
The Fed has used quantitative easing, or QE, since 2008 as it aims to stimulate the economy. The policy, which involves expanding the Fed's balance sheet to buy bonds, has been credited with pushing money into the stock market and it withdrawal is a wild card for markets.
Still, the S&P 500 has jumped about 6 percent so far this year. Many analysts have been expecting the market to ease after the Dow and the S&P 500 came close to all-time highs.
Energy companies' shares were among the weakest, hurt by disappointing results in the sector and a 2 percent drop in crude oil prices.
Newfield Exploration tumbled 9.3 percent to $24.75 while Devon Energy Corp dropped 6.6 percent to $56.57. Both companies posted fourth-quarter losses, with Devon hurt as it wrote down the value of its assets by $896 million because of weak natural gas prices.
Housing shares also declined, pressured by weaker-than-expected results at Toll Brothers Inc and a drop in groundbreaking to build new U.S. homes, also known as housing starts, in January.
Toll Brothers' stock fell 9.1 percent to $33.56, but is up about 4 percent so far this year, building on a jump of nearly 60 percent in 2012. The Dow Jones U.S. Home Construction index lost 6.7 percent.
The Dow's losses were limited by Boeing Co, up 0.2 percent at $74.78 after a source told Reuters that the company had found a way to fix battery problems on its grounded 787 Dreamliner jets. Concerns over that line have weighed on Boeing recently, contributing to a 2 percent drop in the stock's price in January.
Shares of OfficeMax Inc fell 7 percent to $12.09 while Office Depot slid 16.7 percent to $4.18 as the companies announced a $1.2 billion merger agreement. The shares had surged in Tuesday's session after a source said a deal would be announced.
(Video Source: Reuters)