NEW YORK (AP) — Wall Street stumbled yesterday, pulling the Dow Jones Industrial Average 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 increase 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.
Wall Street had been hoping instead that the central bank might lower rates because of the slowing economy.
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 to 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 it seem more distant, said Georges Yared, founder and chief investment officer of Yared Investment Research.
“It’s not bad news, but it’s not great,” Mr. Yared said. “The Fed is doing the right thing here, stepping back and putting the brakes on, but not pushing any panic buttons.”
The Dow fell 89.23, or 0.71 percent, to 12,484.62, after dropping 118 points earlier in the session. The sell-off shaved 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 slid 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.
Bonds fell. 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 S. Bernanke, who said after a speech at New York University that China is unlikely to sell off U.S. assets.
Since recent data has suggested slow economic growth and a stable job market, Wall Street’s recession jitters have eased and inflation has re-emerged as a big concern. Richmond Fed President Jeffrey Lacker said yesterday at a speech in Charlotte, N.C., that the rate of inflation, which has registered 2.3 percent over the past 12 months, remains “uncomfortably high” — a phrase contained in the Fed’s minutes.
The government yesterday reported a 5.5 million-barrel decline in the nation’s gasoline inventories, which was four times what the market expected and the ninth straight weekly drop. Crude oil prices rose 12 cents to $62.01 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 on Wednesday, according to AAA, up more than 25 cents from a month ago and 10 cents higher than a year ago.
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.
Today, investors will likely be reacting to quarterly earnings reports from drug maker Genentech Inc. and BlackBerry maker Research in Motion Ltd., released after the market closed yesterday.
Genentech rose 13 cents to $82.69 before reporting that its first-quarter profit soared 68 percent. The stock climbed an additional 36 cents in after-market trading.
But Research in Motion fell $2.29 to $146.02, and dropped another $9.42 in after-market trading after reporting that its first-quarter profit rose but that it is now under a formal Securities and Exchange Commission investigation over its stock-option granting practices.
Declining issues outnumbered advancers by more than 2 to 1 on the New York Stock Exchange.
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