* S&P 500 posts worst day in over 3 months
* VIX fear index jumps 19.3 pct, biggest gain since November
* Commodity market weakness pressures energy stocks
* Housing shares drop after Toll Bros results
* Dow off 0.8 pct, S&P 500 off 1.2 pct, Nasdaq off 1.5 pct
By Edward Krudy
NEW YORK, Feb 20 U.S. stocks fell the most in
three months and a key gauge of market volatility spiked on
Wednesday after minutes from the U.S. 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.
Wednesday'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 percent - the biggest daily gain for the VIX since
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. The volume of
traded shares hit its second-highest level this year.
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 Corp.
A slide in the commodity sector also weighed on stocks. Spot
gold dropped to the lowest level since July, benchmark
industrial metal copper fell to a one-month low, and U.S. crude
oil futures shed more than $2 a barrel.
On Wall Street, the Dow Jones industrial average
dropped 108.13 points, or 0.77 percent, to 13,927.54 at the
close. The Standard & Poor's 500 Index fell 18.99 points,
or 1.24 percent, to 1,511.95. The Nasdaq Composite Index
lost 49.19 points, or 1.53 percent, to end at 3,164.41.
For the benchmark S&P 500, the day's decline was the largest
since Nov. 14.
The Fed has used quantitative easing, or QE, since 2008 as
it aims to stimulate the economy. The policy, which involves
expanding the Fed's balance sheet to buy bonds, has been
credited with pushing money into the stock market and it
withdrawal is a wild card for markets.
Still, the S&P 500 has jumped about 6 percent so far this
year. Many analysts have been expecting the market to ease after
the Dow and the S&P 500 came close to all-time highs.
Energy companies' shares were among the weakest, hurt by
disappointing results in the sector and a 2 percent drop in
crude oil prices. The Energy Select Sector SPDR exchange-traded
fund fell 2.1 percent.
Newfield Exploration tumbled 9.3 percent to $24.75
while Devon Energy Corp dropped 6.6 percent to $56.57.
Both companies posted fourth-quarter losses, with Devon hurt as
it wrote down the value of its assets by $896 million because of
weak natural gas prices.
Earlier in the day, unconfirmed rumors that a troubled hedge
fund was selling assets added some downward pressure to the
market. The rumors appeared to be unfounded.
"I heard the chatter about a hedge fund liquidating things
today but how big, I don't know. Certainly, it sparks concern,"
said Michael James, senior trader at Wedbush Morgan in Los
Housing shares also declined, pressured by
weaker-than-expected results at Toll Brothers Inc and a
drop in groundbreaking to build new U.S. homes, also known as
housing starts, in January.
Toll Brothers' stock fell 9.1 percent to $33.56, but is up
about 4 percent so far this year, building on a jump of nearly
60 percent in 2012. The Dow Jones U.S. Home Construction index
lost 6.7 percent.
"Valuations appear a bit high at these levels, and if I was
in a name that had seen a huge run, I'd want to take some chips
off the table," said Matt McCormick, money manager at Bahl &
Gaynor in Cincinnati.
The Dow's losses were limited by Boeing Co, up 0.2
percent at $74.78 after a source told Reuters that the company
had found a way to fix battery problems on its grounded 787
Dreamliner jets. Concerns over that line have weighed on Boeing
recently, contributing to a 2 percent drop in the stock's price
Shares of OfficeMax Inc fell 7 percent to $12.09
while Office Depot slid 16.7 percent to $4.18 as the
companies announced a $1.2 billion merger agreement. The shares
had surged in Tuesday's session after a source said a deal would
Rival Staples Inc fell 7.2 percent to $13.60 and
ranked as one of the S&P 500's biggest decliners.
About 7.49 billion shares changed hands on the New York
Stock Exchange, the Nasdaq and NYSE MKT, above the 6.48 billion
daily average so far this year.