U.S. stocks fell, giving the Standard & Poor’s 500 Index its biggest two-day loss since 2011, as global equities tumbled after the Federal Reserve said it may phase out stimulus and China’s cash crunch worsened.
All 10 groups in the S&P 500 declined at least 1.8%, as consumer and energy shares led losses. Newmont Mining Corp. dropped 7.7% as gold plunged to the lowest in more than 2 1/2 years. An index of homebuilders fell the most in a year, as PulteGroup Inc. and D.R. Horton Inc. tumbled more than 9.1%.
The S&P 500 sank 2.3% to 1,591.54 at 3:16 p.m. in New York. The benchmark index has lost 3.7% over two days, the most since November 2011. The Dow Jones Industrial Average erased 332.30 points, or 2.2%, to 14,779.89. The gauge dropped the most since November. Trading of S&P 500 companies was 38% higher than the 30-day average.
“The Fed is moving to have a less easy policy because the economy is strengthening,” Jason Benowitz, who helps manage about $4.5 billion at Roosevelt Investment Group Inc. in New York, said by telephone. “That in itself is positive, but some of the effects from tapering include increases in long-term bond yields and a strengthening dollar. Both those things raise the specter of potential dislocations in fixed income and emerging markets. These events can affect U.S. equity markets.”
The MSCI All-Country World Index slipped 3.4% today, the most in 19 months, as Asian stocks tumbled 4.1% and European shares retreated 3%, the biggest losses for both regions since 2011. China’s benchmark money-market rates climbed to records as the central bank refrained from using reverse- repurchase agreements to address a cash crunch in the world’s second-biggest economy.
The U.S. 30-year bond yield climbed above 3.5% for the first time since September 2011. The dollar strengthened against 15 of its 16 major peers.
The S&P 500 yesterday fell the most this month after Fed Chairman Ben S. Bernanke said the central bank may end bond purchases by the middle of next year if the U.S. economy improves in line with Fed projections. His speech followed a two-day Federal Open Market Committee meeting in Washington.
“If the incoming data are broadly consistent with this forecast, the committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year,” Bernanke said, referring to the FOMC’s outlook for economic growth, further labor-market gains and inflation accelerating toward a 2% goal.
The S&P 500 has declined 4.7% since its May 21 high on concern the Fed will scale back quantitative easing. The Fed’s record low interest rates and bond purchases have helped fuel a rally in stocks that lifted the S&P 500 as much as 147% from its bear-market low in 2009.