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Stocks took a beating on Wednesday afternoon after the release of minutes from the last Federal Reserve policy meeting suggested that the central bank could slow or halt a stimulus program before U.S. employment picks up.
The S&P 500 closed at 1511.95, down 18.99 points or 1.2 per cent, marking its biggest one-day decline since mid-November. The blue-chip Dow Jones industrial average closed at 13,927.54, down 108.13 points or 0.8 per cent. In Canada, the S&P/TSX composite index closed at 12,714.05, down 96.16 points or 0.8 per cent.
The declines follow multi-year highs for the S&P 500, with the benchmark index up for seven consecutive weeks.
Markets had been relatively weak at the start of trading, following disappointing U.S. housing figures, slumping commodity prices and a dip in shares of Apple Inc.
However, they turned particularly rough after the release of Fed minutes, which said that some Fed officials believed asset purchases – or quantitative easing – should be halted sooner than expected.
"A number of participants stated that an ongoing evaluation of the efficacy, costs, and risks of asset purchases might well lead the (policy-setting) committee to taper or end its purchases before it judged that a substantial improvement in the outlook for the labour market had occurred," the minutes said.
Investors had previously believed that the asset purchases – $85-billion (U.S.) a month – were open-ended, and therefore unlikely to end before the U.S. saw meaningful improvement in its labour market.
Meanwhile, U.S. housing figures generally disappointed. Housing starts fell 8.5 per cent in January, even as building permits rose 1.8 per cent.
That, along with lower-than-expected quarterly sales and earnings from Toll Brothers, hurt homebuilding stocks. Toll Brothers fell 9.1 per cent and PulteGroup Inc. fell 6.8 per cent.
Commodities also took a tumble, amid speculation that a hedge fund was unwinding positions, particularly in oil and silver. Crude oil fell to $94.46 (U.S.) a barrel, down $2.20. Gold fell to $1,578 (U.S.) an ounce, down $26.20. That brings the price of bullion to its lowest level since last summer.
As well, technical analysts noted that gold's 50-day moving average had fallen below its 200-day moving average, forming what is known as a Death Cross, considered to be a bearish signal.
Among Canadian commodity producers, Suncor Energy Inc. fell 0.5 per cent and Barrick Gold Corp. fell 3.3 per cent to a fresh multi-year low.
Apple Inc. fell 2.4 per cent after the Financial Times reported that Foxcon Technology Group, one of Apple's biggest suppliers, had imposed a hiring freeze in Chinese factories – suggesting that production of the iPhone 5 is slowing.
Office Depot Inc. confirmed reports earlier in the week that it has struck a merger deal with OfficeMax Inc., worth $1.2-billion. OfficeMax fell 7 per cent and Office Depot fell 16.7 per cent – though both stocks surged on Tuesday.
David Berman