Stocks Tumble on Fed Outlook
Business + Economy

Stocks Tumble on Fed Outlook

Stocks tumbled on Wednesday as investors digested minutes from the latest Federal Reserve meeting published Tuesday suggesting further monetary stimulus action is unlikely.

Private-sector jobs data from payrolls processor ADP showing U.S. private employers added 209,000 jobs in March, suggested the labor market was continuing to strengthen, but it was not enough to boost investor sentiment.

Spanish borrowing costs jumped at bond auctions on Wednesday, adding more pressure to the market and spreading concern in wider European markets. The Spanish debt auction overshadowed a successful step back into debt markets by neighboring Portugal.

All 10 S&P 500 sectors were down with energy, financial and technology stocks leading the decline.

"The punch bowl is being taken away by the Fed and the ECB and the markets don't like these punch bowls being taken away. But it's all part of getting back to normal. It's a sign that we don't need artificial stimulus, so I think the selloff is temporary," said Doug Cote, chief market strategist with ING Investment Management based in New York.

"The economic numbers just keep coming in strongly, like the ADP report, which is a good sign for Friday's (non-farm payrolls) number."

Supportive policies by the U.S. central bank have been a primary catalyst for the S&P 500 stock index's surge of 30 percent since October, even though improving economic conditions have also played a part in the rally.

The Institute for Supply Management's services-sector index for March fell to 56.0 percent from 57.3 percent in February, the private group reported. Market reaction was muted.

The Dow Jones industrial average was down 153.14 points, or 1.16 percent, at 13,046.41. The Standard & Poor's 500 Index was down 15.79 points, or 1.12 percent, at 1,397.59. The Nasdaq Composite Index was down 43.94 points, or 1.41 percent, at 3,069.63.

In corporate news, Moody's downgraded the ratings of conglomerate General Electric Co and its finance unit General Electric Capital each by a notch, saying there were "material risks" associated with its funding model.

Yahoo Inc said it was laying off 2,000 employees, signaling a broad shakeup of the company. The stock rose 0.5 percent to $15.25.

European Central Bank held interest rates at a record low of 1.0 percent on Wednesday, as widely expected.