US stocks fell the most in three months and a key gauge of market volatility spiked yesterday after minutes from the US 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.
“What Wall Street wants to hear is an absolute sign that the Fed will continue with QE for the indefinite future. When it says we may end it faster, that just raises the uncertainty, and the market hates that,” said Todd Schoenberger, managing partner at LandColt Capital in New York.
Yesterday’s slide marked a rare return of nervousness to markets after their solid march higher this year. The CBOE Volatility index, or the VIX, a measure of investor fear, jumped 19.3 per cent - the biggest daily gain for the VIX since November 2011. 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. 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.
Spot gold dropped to the lowest level since July.
On Wall Street, the Dow Jones industrial average dropped 108.13 points, or 0.77 per cent, to 13,927.54 at the close. The Standard & Poor’s 500 Index fell 18.99 points, or 1.24 per cent, to 1,511.95. The Nasdaq Composite Index lost 49.19 points, or 1.53 per cent, to end at 3,164.41.