Stocks fell into the red on Wednesday as investor anxiety, triggered by a downbeat report on housing starts, was aggravated by the FOMC minutes.
The major American stock indices headed back into the red on Wednesday after the Federal Reserve’s Federal Open Market Committee (FOMC) turned a day of disappointment into a day for ulcers. The day began with disappointing news from the Commerce Department that January housing starts declined even more than expected. The stock indices were already in negative territory when the minutes from this week’s FOMC meeting were released at 2:00. Investors were concerned about the references in the minutes to the Fed’s discussions about ending quantitative easing. Fear that the Fed might take away the punchbowl before the economy is fully recovered put investors in a “risk off” mode. Two-Thirds Chance Home Builders Decline in Price from Here?
As of 2:52 EST, the Dow Jones Industrial Average declined 58 points (0.42 percent) to 13,977. The S&P 500 Index fell 0.86 percent to 1,517 (NYSEARCA:SPY). As the chart (above) indicates, the S&P 500 remains well above its 50-day moving average of 1,472. Its next resistance level is in the 1,550 – 1,570 range. Its Relative Strength Index dropped back to 61.09 (Chart courtesy of Stockcharts.com). The Nasdaq Composite sank 1.06 percent to 3,179 (NASDAQ:QQQ). The Russell 2000 Index declined 0.72 percent to 925 (NYSEARCA:IWM).
The “Dollar Bull” Index ETF (NYSEARCA:UUP) advanced by 17 cents (0.77 percent) to 22.14 as of 2:43 EST.
As of 2:29 EST, the S&P 500 Volatility Index – or VIX – advanced 8.85 percent to 13.40 and the VIX Short-Term Futures ETN rose 5.11 percent to 22.09 (NYSEARCA:VXX).
The Euro STOXX 50 Index finished Wednesday’s trading session with a 0.83 percent drop to 2,640 – dipping back below its 50-day moving average of 2,648. After breaking above its resistance level of 2,700 on January 21, the STOXX 50 continues to experience overhead resistance at that level, which has been a barrier since the beginning of the year. Its Relative Strength Index is 50.62 (NYSEARCA:FEZ). The FTSE 100 advanced 0.26 percent to 6,395 (NYSEARCA:EWU). The German DAX Index declined 0.30 percent to 7,728 (NYSEARCA:EWG). France’s CAC 40 Index fell 0.69 percent to 3,709 (NYSEARCA:EWQ). Spain’s IBEX 35 Index dropped 0.94 percent to 8,147 (NYSEARCA:EWP). Italy’s FTSE MIB Index declined 0.78 percent to 16,533 (NYSEARCA:EWI).
As of 2:40 EST, the euro declined 0.76 percent against the dollar, trading at $1.3287 (NYSEARCA:FXE). The Euro Still Has Further Downside
On London’s ICE Futures Europe Exchange, April futures for Brent crude oil declined by $1.99 (1.69 percent) to $115.53/bbl. (NYSEARCA:BNO, NYSEARCA:USO).
SPDR Dow Jones Industrial Average ETF (NYSEARCA:DIA) -0.42% after the disappointing news about January housing starts.
SPDR EURO STOXX 50 ETF (NYSEARCA:FEZ) -2.11% making a more exaggerated decline than the Euro STOXX 50 Index (which fell only 0.83 percent) as strikes and protests in Greece renew concerns about the European sovereign debt crisis.
SPDR S&P Homebuilders ETF (NYSEARCA:XHB) -3.45% following the disappointing report on January housing starts.
iShares Barclays 20+ Year Treasury Bond Fund (NYSEARCA:TLT) +0.14% as declining stock prices reduce investors’ appetite for risk, making the safe haven of government bonds more attractive. Learn More About iShares ETFs
SPDR S&P 500 INDEX ETF (NYSEARCA:SPY) -0.87% after the Fed minutes increased investor anxiety following the disappointing report on housing starts.
Bottom line: The FOMC minutes were the coup de grâce on a day when investor enthusiasm was crushed by a disappointing report on January housing starts.