COMMENTARY | COLUMNISTS | GEORGE CHAMBERLIN

Stocks retreat as Fed plans more cuts in stimulus

International concerns weighed on investors Wednesday despite a move by the Federal Reserve to cut back on its massive bond-buying program.

The Dow Jones industrial average fell 189.77 points to 15,738.79. The Nasdaq composite index dropped 46.53 points to 4,051.43, and the Standard & Poor’s 500 index lost 18.30 points to 1,774.20 points.

Gold gained $11.40 to $1,262.20 an ounce and oil fell 5 cents to $97.36 a barrel.

The markets reacted to news that central banks in Turkey and Africa raised short-term interest rates to ease concerns about the currency markets. However, the emerging market concerns were not enough to keep the Fed from continuing its tapering efforts.

The program will be reduced to $65 billion a month, the second such action since December.

Yahoo! Inc. (Nasdaq: YHOO) slumped 8.7 percent, the most since July 2009, as its sales forecast signaled slowing growth. Boeing Co. (NYSE: BA) retreated 5.3 percent for its worst drop in more than two years after its 2014 profit forecast trailed analysts’ estimates amid a slowing pace of jet orders.

Dow Chemical (NYSE: DOW) Co. jumped 3.9 percent after stepping up its dividend and share-buyback plan.

About 7.8 billion shares changed hands in the United States, 26 percent above the three-month average.

Stocks extended early losses as Fed policymakers pressed on with another $10 billion reduction in the monthly bond purchases intended to speed a recovery from the worst recession since the Great Depression.

Some officials have expressed concern that the Fed’s record $4.1 trillion balance sheet could help create asset-price bubbles.

“Labor market indicators were mixed but on balance showed further improvement,” the Federal Open Market Committee said Wednesday in a statement after a two-day meeting in Washington that was the last for Chairman Ben Bernanke, who will be succeeded by Vice Chair Janet Yellen on Saturday. “The unemployment rate declined but remains elevated.”

Three rounds of Fed monetary stimulus helped the S&P 500 rise as much as 173 percent from a 12-year low in 2009. The U.S. stock benchmark rallied 30 percent last year, the most since 1997. The index reached an all-time high of 1,848.38 on Jan. 15 but has slumped 4 percent since then.

Speculation about Fed policy has caused turmoil in emerging market currencies. The Turkish lira depreciated as much as 2.4 percent Wednesday, even after the country more than doubled its key interest rate to stem capital outflows. South Africa’s rand also weakened as an unexpected increase in its benchmark interest rate failed to reassure investors.

Facebook Inc. (Nasdaq: FB), Boeing and Dow Chemical (NYSE: DOW) are among the 25 S&P 500 companies that reported earnings Wednesday.

About 77 percent of the S&P 500 companies that have posted earnings this season beat analysts’ projections. Profit at S&P 500 companies probably rose 6.6 percent in the fourth quarter of 2013, and sales increased 2.6 percent, analysts’ estimates compiled by Bloomberg show.

The Chicago Board Options Exchange Volatility Index rose 9.8 percent Wednesday to 17.35. The gauge of S&P 500 options known as the VIX has gained 26 percent this year.

Nine of the 10 main groups in the S&P 500 retreated Wednesday as consumer staples companies fell 1.8 percent to pace losses. Raw-materials suppliers advanced 0.5 percent for the only gain as DuPont Co. (NYSE: DD) rallied 1.9 percent, the most in the Dow.

Yahoo slumped 8.7 percent to $34.89. The company forecast first-quarter sales that signaled slowing growth amid competition from Google Inc. (Nasdaq: GOOG) and Facebook. Yahoo’s fourth-quarter net income rose 28 percent to $348.2 million, while net sales slipped to $1.2 billion from $1.22 billion a year ago, the company said.

Boeing slumped 5.3 percent, the most since August 2011, to $129.78. The world’s largest plane maker forecast a profit for 2014 that fell short of analysts’ estimates as the pace of its jet orders slows after the second-highest year in 2013.

AT&T Inc. (NYSE: T) retreated 1.2 percent to $33.31. The second-largest U.S. wireless carrier forecast 2014 earnings-per-share will grow at a “mid-single-digit” rate, compared with analysts’ estimates for an increase of 7 percent.

McCormick & Co. (NYSE: MKC) slid 6.2 percent to $65.30. The manufacturer of spices and flavorings forecast profit below analysts’ estimates, citing a higher tax rate and slower growth in its U.S. business.

Dow Chemical jumped 3.9 percent to $44.73. The largest U.S. chemical maker expanded its 2014 buyback plan to $4.5 billion from $1.5 billion, while raising the first-quarter dividend 16 percent to 37 cents. Fourth-quarter profit excluding one-time items was 65 cents, topping the 43-cent average of 20 estimates compiled by Bloomberg.

DuPont climbed 1.9 percent to $60.71 after a 1.1 percent decline in the previous session. The biggest U.S. chemical maker by market value said Tuesday that it will repurchase $5 billion of its shares after posting fourth-quarter earnings that exceeded analysts’ estimates.

Medivation Inc. (Nasdaq: MDVN) gained 11 percent to $84.29 after saying its prostate-cancer drug Xtandi slowed the disease in a study. The treatment slowed or stopped cancer growth in 59 percent of patients not on chemotherapy compared with 5 percent of those taking a placebo.

— Bloomberg contributed to this report.

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