Dow Jones - NEW YORK, Feb 20 (Reuters) - U.S.
stocks fell the most in three months and a key gauge of market volatility
spiked on Wednesday after minutes from the U.S. Federal Reserve's most recent
meeting suggested the central bank may slow or stop buying bonds sooner than
expected.
The minutes from the Fed's January
meeting showed many officials voiced concern last month over potential costs of
more asset purchases, suggesting that the program, known as QE, may slow before
the pickup in hiring it was intended to deliver.
"What Wall Street wants to hear
is an absolute sign that the Fed will continue with QE for the indefinite
future. When it says we may end it faster, that just raises the uncertainty,
and the market hates that," said Todd Schoenberger, managing partner at
LandColt Capital in New York.
Wednesday's slide marked a rare
return of nervousness to markets after their solid march higher this year. The
CBOE Volatility index or the VIX, a measure of investor fear,
jumped 19.3 percent - the biggest daily gain for the VIX since November 2011.
In a sign of broad market weakness,
the number of declining stocks outnumbered advancers by a ratio of more than 3
to 1 on both the New York Stock Exchange and the Nasdaq. The volume of traded
shares hit its second-highest level this year.
A slide in the commodity sector also
weighed on stocks. Spot gold dropped to the lowest level since July, benchmark
industrial metal copper fell to a one-month low, and U.S. crude oil futures
shed more than $2 a barrel.
On Wall Street, the Dow Jones
industrial average dropped 108.13 points, or 0.77 percent, to
13,927.54 at the close. The Standard & Poor's 500 Index fell 18.99 points, or 1.24 percent, to 1,511.95. The Nasdaq Composite Index lost 49.19 points, or 1.53 percent, to end at 3,164.41.
For the benchmark S&P 500, the
day's decline was the largest since Nov. 14.
The Fed has used quantitative
easing, or QE, since 2008 as it aims to stimulate the economy. The policy,
which involves expanding the Fed's balance sheet to buy bonds, has been
credited with pushing money into the stock market and it withdrawal is a wild
card for markets.
Still, the S&P 500 has jumped
about 6 percent so far this year. Many analysts have been expecting the market
to ease after the Dow and the S&P 500 came close to all-time highs.
Energy companies' shares were among
the weakest, hurt by disappointing results in the sector and a 2 percent drop
in crude oil prices. The Energy Select Sector SPDR exchange-traded fund fell 2.1 percent.
Earlier in the day, unconfirmed
rumors that a troubled hedge fund was selling assets added some downward
pressure to the market. The rumors appeared to be unfounded.
"I heard the chatter about a
hedge fund liquidating things today but how big, I don't know. Certainly, it
sparks concern," said Michael James, senior trader at Wedbush Morgan in
Los Angeles.
"Valuations appear a bit high
at these levels, and if I was in a name that had seen a huge run, I'd want to
take some chips off the table," said Matt McCormick, money manager at Bahl
& Gaynor in Cincinnati.
Brent Crude Oil - NEW YORK, Feb 20 (Reuters) - Brent crude futures fell on
Wednesday, joining in a sell-off hitting precious metals and copper, while
expectations that Saudi Arabia intends to boost production also applied
pressure to oil.
Brent April crude fell $1.92,
or 1.63 percent, to settle at $115.60 a barrel, having traded from $115.05 to
$117.66.
CBOT Soybean - Soybean futures on the Chicago Board of Trade rose for a
third day on firm cash markets and fears that recent export demand is eroding already tight U.S. soybean supplies, traders said.
* Traders worry that logistical delays will slow the movement of South American soybeans and soy products into
the export pipeline, and steer export demand to the United
States.
·
CBOT March
options expire on Friday, and heavy open interest
in CBOT March soybean call options at the $15 strike could act
as a magnet for prices.
·
Basis bids
for soybeans shipped by barge to the U.S. Gulf Coast were
steady to firm early on Wednesday despite scattered farmer
selling, with spot values supported by good exporter demand for
near-term supplies, traders said.
·
Crop
forecaster Lanworth cut its forecast for Argentina's 2013
soybean harvest to 49.6 million tonnes, from 51.6 million previously,
and raised its forecast for Brazilian soybean production
to 81.0 million tonnes, from 80.3 million.
·
Lanworth
said it expects U.S. 2013/14 soybean production to rise to
3.465 billion bushels with an average yield of 43.1 bushels
per acre, up from the 2012/13 crop of 3.015 billion bushels
with an average yield of 39.6.
·
Grains and
soy withstood weakness in equities, gold and oil after
minutes of the Federal Reserve's meeting last month showed it
may stop or slow its bond-buying program sooner than expected.
·
Ag markets
also shook off rumors that a troubled hedge fund was
selling assets.
BMD FCPO - KUALA LUMPUR, Feb 20 (Reuters) -
Malaysian palm oil futures edged down in choppy trade on Wednesday, as dismal
export data offset optimism that demand could get a boost if dry Latin American
weather dents supply of rival soyoil.
U.S. soybeans hit a 12-day high on
Wednesday as the oilseed drew more support from concerns that dry weather in
Argentina would cut the upcoming harvest.
Traders fear that a boost in palm
oil demand may not be strong enough to reduce a 2.58 million tonne stockpile in
Malaysia, with exports in the first 20 days of February inching up just 0.6
percent from a month ago.
Another cargo surveyor, Societe
Generale de Surveillance, reported a slight 0.3 percent drop in palm oil
exports for the same period.
Malaysia's plan to raise its crude
palm oil export tax for March to 4.5 percent from February's zero percent,
making the grade more expensive for overseas buyers, also weighed on prices.
"There is uncertainty over the
demand in March because of the export tax on crude palm oil, while end-stocks
are still hovering above 2.5 million tonnes," said a trader with a local
commodities brokerage in Kuala Lumpur.
The benchmark May contract on the Bursa Malaysia Derivatives Exchange inched down 0.2 percent to close at
2,561 ringgit ($827) per tonne. Prices traded in a range between 2,546-2,584
ringgit.
Total traded volumes stood at 30,525
lots of 25 tonnes each, higher than the usual 25,000 tonnes.
Palm oil inventories in Malaysia,
the world's No.2 producer, eased 1.9 percent in January from record highs of
2.63 million tonnes, the first decline in stocks since June.
Although overall output is expected
to rise again this year, analysts say appetite could gain as well.
Hamburg-based oilseeds analysts Oil
World said on Tuesday it expects Malaysia's 2012/2013 output to increase to
19.7 million tonnes, adding that growing consumption could help ease global
stocks.
Brent crude dropped toward $117 a
barrel on Wednesday on the prospect of more Saudi supply while investors look
ahead to economic and inventory data from the United States for clues on demand
in the world's largest oil consumer.
In other vegetable oil markets, the
U.S. soyoil for May delivery edged up 0.2 percent in late Asian trade. The most active September soybean oil
contract on the Dalian Commodity Exchange rose 0.7
percent.
Regional Equities - Feb 20 (Reuters) - Southeast Asian
stock markets mostly gained on Wednesday, with the Philippines and Indonesian
stock markets hitting a record high, while Thailand ended at a 19-year peak as
an improving global economic outlook helped boost investor appetite for risky
assets.
The Philippine index ,
which saw a net foreign inflow of $7.5 million, hit a fresh all-time high of
6,690.00 points, before ending 0.42 percent up at 6,648.57, surpassing its
previous record close of 6,632.56 on Tuesday.
Indonesia gained 0.7 percent to hit a new record high close of 4,634.45 with a foreign
inflow of $28.1 million, led by property shares, Reuters data showed.
Bangkok's SET index jumped 0.95 percent to 1,546.64, to hit a 19-year closing high after the Thai
central bank expectedly maintained its policy interest rate and said the
economy could grow more than forecast this year.
Singapore ended 0.4 percent firmer at 3,308.89, while Vietnam,
the region's smallest bourse and the best performer this year, gained 0.8
percent at 494.83.
Bucking the trend, Malaysia ended 0.1 percent weaker at 1613.33 with a net foreign outflow of $6.93
million, the stock market data showed.
FOREX - NEW YORK, Feb 20 (Reuters) - The
dollar jumped to a four-week high against the euro and rose versus the yen on
Wednesday after minutes from the Federal Reserve's last meeting suggested
policymakers may have to slow or stop buying assets before seeing the pick-up
in hiring.
The Australian, Canadian and New
Zealand dollars fell as weakness in stocks and commodities prompted investors
to dump riskier assets. Sterling tumbled on speculation of further monetary
easing by the Bank of England.
Policymakers are increasingly
worried about the costs and risks of their quantitative-easing program, the Fed
minutes showed, fueling expectations the central bank may scale back its
stimulus program sooner rather than later.
"The dollar has been generally
firm all day and the (Fed) minutes have been seized as a handy reason to extend
those gains," said Marc Chandler, global head of currency strategy at
Brown Brothers Harriman.
The U.S. currency had been rising
even before the Fed minutes as weakness in equities and commodities and
speculation of a hedge fund selling assets spurred investors to seek safe
havens.
