NEW YORK (Reuters) - U.S. stocks tumbled on Wednesday as minutes from last month’s Federal Reserve meeting hinted at the need for more rate hikes, adding to worries about surging gasoline prices and the weak housing market.
Concern that Citigroup’s long-anticipated restructuring might not be enough to energize its lackluster stock helped to drag down the Dow, ending an eight-day streak of gains.
Citigroup shares ended down 1.2 percent.
Stocks had been down for most of the day, then they raced sharply lower in mid-afternoon when minutes from the Fed’s latest meeting showed policy-makers saw both greater risks of slower economic growth and uncertainty that core inflation would recede.
“The market started the year thinking that the next move was a rate cut and now, who knows?” said Emanuel Weintraub, managing director of Integre Advisors, in New York.
“The Fed news was not good. You’re really in a box here. At this point, it seems your ‘best case’ scenario is an inflationary environment and your worst case is a stagflationary environment.”
The Dow Jones industrial average .DJI fell 89.23 points, or 0.71 percent, to end at 12,484.62. The Standard & Poor's 500 Index .SPX dropped 9.52 points, or 0.66 percent, to finish at 1,438.87. The Nasdaq Composite Index .IXIC declined 18.30 points, or 0.74 percent, to close at 2,459.31.
The drop in the blue-chip Dow average is its biggest daily percentage fall since March 28. The Dow had risen for eight straight sessions, its longest string of gains in four years, although the increases in several sessions were modest.
Shares of BlackBerry maker Research In Motion Ltd. RIMM.O RIM.TO fell about 7 percent to $135.92 in after-hours electronic trading, after the Canadian company reported results, including revenue that just missed expectations. It also revealed that an informal inquiry by the U.S. Securities and Exchange Commission into stock-option grants has been upgraded to a formal investigation. In Nasdaq trading, shares of Research in Motion fell 1.5 percent to end at $146.02.
Shares of Genentech DNA.N traded up slightly at $82.85 in electronic trading after the bell, after the company posted results that beat analysts’ forecasts. During the regular session, Genentech shares gained 0.2 percent to close at $82.69 on the NYSE.
Just ahead of the summer driving season, gasoline prices spiked in the futures market — giving Wall Street and consumers something more to worry about.
U.S. government data showed a larger-than-expected drop in gasoline supplies last week, which pushed gasoline futures up to an eight-month high.
Shares of Citigroup lost 1.2 percent to $51.80, while the S&P financial index .GSPF dropped 0.8 percent.
Citigroup helped pull down the Dow after the bank said it will eliminate 17,000 jobs, or 5 percent of its work force. The restructuring news had been expected for several weeks and helped push Citigroup’s shares up 7.5 percent since mid-March.
The stocks of other companies in the financial and housing-related sectors fell after the National Association of Realtors said tougher lending standards will slow the recovery in the U.S. housing market and data showed a fourth-straight weekly decline in U.S. mortgage applications.
The Dow Jones U.S. Home Construction index .DJUSHB was down nearly 2 percent.
The housing slump will likely slow the U.S. economy, but will not trigger a recession, the International Monetary Fund said on Wednesday. The IMF lowered the forecast it made in September for 2007 GDP expansion to 2.2 percent from 2.9 percent.
Trading was moderate on the New York Stock Exchange, with about 1.57 billion shares changing hands, below last year’s estimated daily average of 1.84 billion.
On Nasdaq, about 2.06 billion shares traded, above last year’s daily average of 2.02 billion.
Declining stocks beat advancing ones by a little more than 2 to 1 on the NYSE. On the Nasdaq, about two stocks fell for every one that rose.