U.S. benchmark stock indexes tumbled from five-year highs while oil, gold and silver led commodities lower as minutes from the Federal Reserve’s last meeting showed policy makers debated the risks and benefits of bond purchases.
The Standard & Poor’s 500 Index slid 1.3% to 1,511.82 at 4 p.m. in New York, its biggest plunge since November. The VIX, the benchmark gauge of U.S. equity options, jumped 19%. Oil futures tumbled 2.3% to $94.46 a barrel, the biggest drop in three months, while silver sank more than 3% and gold declined to an almost eight-month low. New Zealand’s dollar depreciated 1.5% to 83.42 U.S. cents as the central bank said it’s ready to influence the currency’s exchange rate.
The Dollar Index, a gauge of the currency against six major peers, climbed 0.8% after the minutes were released. Fed officials “emphasized that the committee should be prepared to vary the pace of asset purchases, either in response to changes in the economic outlook or as its evaluation of the efficacy and costs of such purchases evolved.”
“It doesn’t take a lot of imagination to think about where the next potential source of weakness or worry is going to be, and that’s going to be when the Fed steps back from their quantitative easing program,” Brian Barish, president of Denver, Colorado-based Cambiar Investors LLC, which manages about $7 billion, said in a phone interview.
The Fed minutes showed policy makers were divided about the strategy behind Chairman Ben S. Bernanke’s program of buying bonds until there is “substantial” improvement in a U.S. labor market burdened with 7.9% unemployment, with some saying an earlier end to purchases might be needed, and others warning against a premature withdrawal of stimulus.
The S&P 500 climbed to the highest level since October 2007 yesterday and ended the session trading for 15.1 times reported earnings, the most-expensive level since July 2011.
The benchmark gauge of U.S. equities closed yesterday about 2.2% below its record high and was up 7.3% in 2013, almost double the gains in the MSCI Asia Pacific and the Stoxx Europe 600 Index.
“The market has moved too far,” Bruce McCain, chief investment strategist at the private-banking unit of KeyCorp in Cleveland, said in a phone interview. His firm oversees $20 billion. “We need to take a breather. Even good, solid economic reports are probably not living up to the expectations. It doesn’t mean that we’ll see a selloff. Yet we’ll probably move sideways.”
Apple Inc. fell after Foxconn Technology Group, the biggest assembler of Apple products, froze hiring across China, spurring concern demand is slowing. Toll Brothers Inc., the largest U.S. luxury-home builder, sank after earnings that missed estimates. Caterpillar Inc. slid after saying global retail machine sales dropped.
The VIX, as the Chicago Board Options Exchange Volatility Index is known, jumped 19% to 14.60 for its biggest gain on a closing basis since November 2011.
Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.