The minutes from the Fed’s January meeting showed that many officials voiced concern over the potential costs of more asset purchases, suggesting that a bond-buying program known as quantitative easing, or Q.E., could slow before a pickup in hiring that it was intended to deliver.
The volatility index on the Chicago Board Options Exchange, or the VIX, a measure of investor fear, jumped 19.3 percent, the biggest daily gain for the VIX since November 2011. Wednesday’s slide was a return of nervousness to markets after their solid march higher this year.
“What Wall Street wants to hear is an absolute sign that the Fed will continue with Q.E. for the indefinite future. When it says we may end it faster, that just raises the uncertainty, and the market hates that,” said Todd M. Schoenberger, managing partner at LandColt Capital in New York.
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 including the homebuilder Toll Brothers, the fertilizer maker CF Industries and the oil and gas producer Devon Energy, booked sharp losses after disappointing earnings and outlooks.
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 crude oil futures in the United States shed more than $2 a barrel.
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-stock 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-stock index, the day’s decline was the largest since Nov. 14.
The Fed has used the bond purchasing program since 2008 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. How an end of easing would affect markets is not known.
Still, the S. P. 500 has risen about 6 percent this year. Many analysts have been expecting the market to ease after the Dow and the S. P. came close to highs.
Energy companies’ shares were among the weakest on Wednesday, hurt by disappointing results in the sector and a 2 percent drop in crude oil prices. The Energy Select Sector SPDR, an exchange-traded fund, fell 2.1 percent.
Newfield Exploration fell 9.3 percent to $24.75 while Devon Energy dropped 6.6 percent to $56.57. Both companies posted fourth-quarter losses, with Devon hurt as it wrote down the value by $896 million because of weak natural gas prices.
Early Wednesday, unconfirmed rumors that a troubled hedge fund was selling assets added some downward pressure to the market. The rumors appeared to be unfounded.
“I heard the chatter about a hedge fund liquidating things today but how big, I don’t know. Certainly, it sparks concern,” said Michael James, senior trader at Wedbush Morgan in Los Angeles.
Housing shares also declined, pressured by weaker-than-expected results at Toll Brothers and a drop in groundbreaking to build homes, also known as housing starts, in January.
Toll Brothers’ stock fell 9.1 percent to $33.56, but is up about 4 percent this year, building on a jump of nearly 60 percent in 2012. The Dow Jones U.S. Home Construction index lost 6.7 percent.
“Valuations appear a bit high at these levels, and if I was in a name that had seen a huge run, I’d want to take some chips off the table,” said Matthew D. McCormick, money manager at Bahl Gaynor in Cincinnati.
Shares of OfficeMax 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.
A rival, Staples, fell 7.2 percent to $13.60 and ranked as one of the S. P.’s biggest decliners.
Interest rates were lower. The Treasury’s benchmark 10-year note rose 5/32, to 9929/32, and the yield fell to 2.01 percent from 2.03 percent late Tuesday.
Article source: http://www.nytimes.com/2013/02/21/business/daily-stock-market-activity.html?partner=rss&emc=rss