Fed fears rattle Wall Street

U.S. stocks fell Tuesday, with the S&P 500 retreating from four-year highs after the U.S. Federal Reserve said it was less inclined to provide more economic stimulus.

Supportive central bank policies have been a primary catalyst for the S&P 500’s surge of 30% since October, even though improving economic conditions have also played a part in the rally. Investors still expect a pullback, but markets have remained resilient, often cutting losses going into the close, as they did both Monday and Tuesday.

Sectors tied to growth were the big losers of the day, with energy shares down 1%, and materials off 0.9%. These sectors and the broader market extended losses after the release of the Fed’s minutes, though they subsequently rebounded. The day’s strongest performer, utilities, is considered a defensive play.

In the past week, economic figures have been less bullish for markets, making the less supportive words from the Fed a disappointment. But U.S. auto sales posted their best quarter since 2008, another sign of recovery in demand. General Motors Co. (GM/NYSE) shares slumped 4.6% to US$25.54 as its sales trailed others. Ford Motor Co. (F/ NYSE) rose 0.2% to US$12.64.

Financials fell 0.7%, with Morgan Stanley (MS/NYSE) off 2.2% at US$19.37 after the Fed said it was taking action for the way one of its mortgage servicing units handled home loans.

The Dow Jones industrial average declined 64.94 points, or 0.49%, to 13,199.55. The Standard & Poor’s 500 Index slipped 5.73 points, or 0.4%, to 1,413.31. The Nasdaq composite index dropped 6.13 points, or 0.2%, to 3,113.57.