Stocks stumble after Fed leaves door open
NEW YORK » Wall Street stumbled yesterday, pulling the Dow Jones industrials down nearly 90 points after minutes from the Federal Reserve's most recent meeting indicated the central bank is not ruling out an interest rate hike to curb inflation.
The minutes, coupled with a jump in gasoline prices, heightened investor worries about inflation and drove an already sagging stock market even lower.
But the minutes released yesterday showed the Fed was remaining steadfast in its vigilance against inflation. The Fed's Open Market Committee said at its March 20-21 meeting, "all members agreed the statement should indicate that the committee's predominant policy concern remains the risk that inflation will fail to moderate as expected."
Though many investors are still counting on an eventual rate cut, the Fed's tough stance on inflation has made the possibility seem more distant, said Georges Yared, founder and chief investment strategist for Yared Investment Research.
The Dow fell 89.23, or 0.71 percent, to 12,484.62, after dropping 118 points earlier in the session. Yesterday's selloff shaved off six sessions' worth of gains, and was the first retreat after eight days of advances, the blue chip index's longest winning streak since 2003.
Broader stock indicators also declined. The Standard & Poor's 500 index slipped 9.52, or 0.66 percent, to 1,438.87, and the Nasdaq composite index fell 18.30, or 0.74 percent, to 2,459.31. The Russell 2000 index of smaller companies fell 6.27, or 0.77 percent, to 808.24.
Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange, where volume came to 1.57 billion shares, up from 1.33 billion Tuesday.
Bonds fell after the Fed minutes were released. The yield on the benchmark 10-year Treasury note rose to 4.74 percent from 4.72 percent late Tuesday. The dollar was higher against the euro and the yen, while gold prices were unchanged.
The dollar was helped by comments from Fed Chairman Ben Bernanke, who said after a speech at New York University that China is unlikely to sell off U.S. assets.
Crude oil prices rose 2 cents to $61.91 a barrel on the New York Mercantile Exchange, while gasoline futures rose more than 3 cents to $2.1587 a gallon, an eight-month high.
At the retail level, the average U.S. price of a gallon of gasoline was $2.795 yesterday, according to AAA, up more than 25 cents from a month ago and 10 cents higher than a year ago.
In corporate news yesterday, Citigroup Inc., the nation's largest financial institution, said it would eliminate about 17,000 jobs. But Citigroup's plan to cut about 5 percent of its 327,000-member work force wasn't enough for investors, who had expected a bigger restructuring to slash costs and raise profits. Citigroup fell 60 cents to $51.80.
Alcoa Inc., the first of the 30 Dow components to report results from the most recent quarter, beat expectations. The aluminum maker rose 18 cents to $35.08 after reporting late Tuesday that its first-quarter profit rose 9 percent.