Stocks fall further as investor unease grows
NEW YORK » Volatility returned to Wall Street yesterday, sending stocks plunging as investors grew more uneasy about the economy and whether the Federal Reserve will take the steps needed to prevent credit market problems from spreading further.
The Dow Jones industrials fell 280 points.
The stock market found little to assuage its concerns in minutes from the Fed's last meeting, released during afternoon trading. The major indexes' losses steepened after investors parsed the minutes for signs of a possible cut in interest rates.
There had been some hope on the Street that Fed policymakers might have sent a stronger signal that they were more willing to cut interest rates to help calm turbulent market conditions.
But in the minutes from the Federal Open Market Committee's Aug. 7 meeting, while the central bank noted the turmoil in the markets and said, "to the extent such a development could have an adverse effect on growth prospects, might require a policy response," it didn't discuss a cut in the benchmark federal funds rate that Wall Street has wanted.
Wall Street seems to be growing more dissatisfied because the Fed has not yet lowered the funds rate -- and with a return to the intense volatility seen earlier this month may be trying to force the Fed to act.
"Investors are getting whipped side-to-side because their expectations, which are changing almost on a daily basis, aren't being met," said Chris Johnson, chief investment strategist at Johnson Research Group. "We've gone from the roof is on fire to the Fed is riding in on a white horse, and what we're seeing now is a reality check."
Stocks were down the entire session on further worries about the economy. The Conference Board's report that consumer confidence sagged in August amid volatile financial markets and ongoing housing problems added to the downbeat mood on the Street.
Keeping alive credit worries, a Standard & Poor's housing index showed that U.S. home prices in the second quarter posted the sharpest decline since 1987.
The Dow fell 280.28, or 2.10 percent, to 13,041.85, its biggest drop since Aug. 9.
Broader stock indicators were also lower. The Standard & Poor's 500 index was down 34.43, or 2.35 percent, at 1,432.36, and the Nasdaq composite index shed 60.61, or 2.37 percent, to 2,500.64.
The dollar was lower against other major currencies, while gold prices were slightly lower.
Light, sweet crude fell 24 cents to $71.73 a barrel on the New York Mercantile Exchange.
The Russell 2000 index of smaller companies was down 21.6, or 2.74 percent, at 767.83.
Declining issues beat out advancers by a 3 to 1 basis on the New York Stock Exchange, where volume came to a light 1.15 billion shares.
Fixed-income investors were encouraged by the consumer confidence report, which could indicate the Fed will be more likely to lower rates at its September meeting. Bond prices rose, with the yield on the benchmark 10-year Treasury note falling to 4.52 percent from 4.57 percent.