Stocks erase most of early losses after mixed trading
NEW YORK — After an early slide, U.S. stocks clawed back much of the ground they lost and ended slightly lower Wednesday. Banks climbed but retailers, homebuilders and smaller companies fell.
Stocks slumped in morning trading as homebuilders and retailers took sharp losses after the Commerce Department said construction of new homes dropped in September. Technology companies fell as IBM suffered its biggest loss in five and a half years after it reported weak sales. Stocks were coming off their biggest gain in more than six months.
Bond prices fell, sending yields higher, after the Federal Reserve said some of its policymakers argued in their latest meeting that the central bank should raise rates to a level that slows economic growth slightly. After years of record low rates following the financial crisis, the fact that some policymakers are talking about eventually using them to slow the economy is a big change.
Jeremy Zirin, head of investment strategy for UBS’ global wealth management business, said the Fed won’t raise rates to those levels unless there is clear evidence inflation has increased. But he said it makes sense for investors to be wary. “Overly restrictive monetary policy is a risk to the bull market,” he said. “It would be a mistake for (the Fed) to raise rates in the absence of inflation beyond their target, and it’s exceedingly unlikely to do so.”
The S&P 500 index fell 0.71 points to 2,809.21. The Dow Jones industrial average slumped 91.74 points, or 0.4 percent, to 25,706.68. It lost as much as 319 points Wednesday morning before briefly turning higher.
The Nasdaq composite slid 2.79 points to 7,642.70. The Russell 2000 index of smaller-company stocks skidded 7.23 points, or 0.5 percent, to 1,589.60.
Stock trading has been erratic recently. Earlier this month the benchmark S&P 500 index went through a six-day losing streak that included huge drops last Wednesday and Thursday. Then on Friday the S&P 500 jumped 1.4 percent, its biggest rally in three months, fell on Monday, and surged 2.1 percent Tuesday. Trading had been steady from late June to early October.
The Federal Reserve released minutes from its meeting in late September, when it raised interest rates for the third time this year. A few participants believed that the Fed’s key interest rate would eventually need to “become modestly restrictive” to make sure inflation doesn’t climb too high. Other officials felt the Fed shouldn’t take that step unless there are signs the economy is overheating and inflation is rising quickly. Bond prices sank. The yield on the 10-year Treasury note rose to 3.19 percent from 3.15 percent.