S&P 500 posts biggest two-day drop since 2011 on Fed concerns

Housing Data

Data today showed sales of previously owned U.S. homes climbed more than forecast in May to the highest level since November 2009, and the Fed Bank of Philadelphia’s general economic index increased. Another report showed more Americans than forecast filed applications for unemployment benefits, while an index of U.S. leading indicators rose less than projected in May.

The market “feels like Bernanke will be there forever with the safety net and it’s just not true,” Uri Landesman, president of New York-based hedge fund Platinum Partners, which manages about $1.2 billion, said by phone. “There’s going to be a period of disappointment about that across asset classes.” He said, “We’re going to have a very volatile second half of 2013.”

Bond Purchases

Bernanke will cut the Fed’s $85 billion in monthly bond purchases by $20 billion at the Sept. 17-18 policy meeting, according to 44% of economists in a Bloomberg survey.

The survey of 54 economists followed Bernanke’s press conference yesterday, in which he mapped out a timetable for an end to one of the most aggressive easing strategies in Fed history. His remarks prompted economists to predict a faster reduction in purchases: in a June 4-5 survey, only 27% of economists forecast tapering would start in September.

The Chicago Board Options Exchange Volatility Index, or VIX, rallied 22% to 20.30, climbing above 20 for the first time this year. The gauge has jumped 80% since hitting a six-year low in March. The equity volatility gauge is trading at the biggest premium relative to its 200-day moving average this year.

More than 21 stocks fell for each that rose in the S&P 500, putting the index on track for the broadest decline in two months, according to data compiled by Bloomberg. Consumer and raw-material companies erased more than 2.6% among S&P 500 groups. Newmont lost 7.7% to $29.44 as gold fell below $1,290 an ounce to the lowest price since September 2010.

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