Fears Fed will taper stimulus hit Wall Street

US stocks dropped one per cent yesterday, extending a recent selloff, as investors grappled with concerns that the Federal Reserve may begin to scale back its bond-buying stimulus while the economy is still sluggish.

Selling was broad-based, with all but two of the S&P sectors down more than one per cent. The materials index fell 2.1 per cent as the day’s worst performer. Decliners outpaced advancers on the New York Stock Exchange by more than 4 to 1.

Analysts said recent selling could suggest the market may be moving away from its seven-month rally. The benchmark S&P 500 has now fallen 3.6 per cent since its all-time closing high on 21 May, a day before Fed chairman Ben Bernanke said the US central bank may decide to taper its stimulus in the next few policy meetings if data shows the economy is gaining traction.

“I think we’re to the point where there hasn’t been a whole lot of good news, and the level of concern regarding the Fed’s action is kind of overwhelming and has set up a modest tone consistent with a pullback,” said Fred Dickson, chief market strategist at D.A. Davidson.

The Dow Jones industrial average was down 216.95 points, or 1.43 per cent, at 14,960.59. The Standard & Poor’s 500 Index was down 22.48 points, or 1.38 per cent, at 1,608.90. The Nasdaq Composite Index was down 43.78 points, or 1.27 per cent, at 3,401.48. The Dow and Nasdaq registered their biggest percentage drops in about six weeks, while the S&P 500 came close to breaking below its 50-day moving average at 1,604, a possible signal of more bearish sentiment.