Stocks fall amid concern stimulus efforts won’t be enough

Comments from a key official of the Federal Reserve about the effectiveness of the recent quantitative easing efforts sent stock prices lower on Tuesday.

The Dow Jones Industrial Average fell 101.37 points to 13,457.55. The Nasdaq Composite Index dropped 43.05 points to 3,117.73, and the S&P 500 Stock Index was down 15.30 points to 1,441.59.

"We are unlikely to see much benefit to growth or employment from further asset purchases," said Charles Plosser, president of the Federal Reserve Bank of Philadelphia, a reference to the decision last week to authorize the purchase of $40 billion a month in mortgage-backed securities to keep interest rates low and encourage borrowing.

The news reversed a modest rally that followed a report from the Conference Board showing its consumer confidence index rose in September to the highest level since February.

Commodities stayed in a narrow range. Gold rose $1.80 to $1,766.40 an ounce. Oil dropped 56 cents to $91.37 a barrel.

Apple Inc. (Nasdaq: AAPL) dropped 2.5 percent, extending a two-day decline to 3.8 percent, the most since July. Caterpillar Inc. (NYSE: CAT), the world’s biggest construction and mining equipment maker, slumped 4.3 percent after cutting its forecast for 2015 earnings. Red Hat Inc. (NYSE: RHT), the largest seller of the open-source Linux operating system, lost 4.3 percent amid disappointing earnings.

“Things won’t get better as fast as people think they will,” said Malcolm Polley, who manages $1.1 billion as chief investment officer at Stewart Capital in Indiana, Pa. “The Fed’s actions are not going to lead to higher growth.”

Both the S&P 500 and the Dow average are near their all-time highs of October 2007 as investors bought equities amid optimism about better-than-estimated earnings and central bank stimulus measures. The Dow needs to rise 5.3 percent to reach its peak of 14,164.53, while the S&P 500 needs an increase of 8.6 percent to reach its record of 1,565.15.

“The economic numbers are decent,” said Burt White, who oversees about $350 billion as chief investment officer at LPL Financial Corp. in Boston. “The housing healing is here. The fact that you’re starting to see stabilization in housing is a real boost to confidence.”

All 10 groups in the S&P 500 retreated; technology, financial and commodity shares had the biggest declines.

Staples Inc. (Nasdaq: SPLS) retreated 4.5 percent to $11.80. The company plans to shut 45 locations in Europe and accelerate the closing of 15 stores in the United States as part of a plan to save about $250 million a year. The closings, the impairment of goodwill in the European business and other actions will result in total pretax charges of as much as $1.12 billion in the fiscal year ending in January, Staples said in a statement.

Tesla Motors Inc. (Nasdaq: TSLA) dropped 9.8 percent to $27.66. The electric-car maker led by Elon Musk cut its revenue outlook for the third quarter because of supplier shortcomings and other delays in accelerating production of its Model S sedan.

Gevo Inc. (Nasdaq: GEVO) slumped 35 percent to $2.14, a record low. The U.S. biofuel producer backed by French oil company Total SA (NYSE: TOT) and specialty-chemicals maker Lanxess AG announced plans to stop producing isobutanol at its facility in Luverne, Minn.

Merrimack Pharmaceuticals Inc. (Nasdaq: MACK) tumbled 17 percent to $9.09. The developer of cancer drugs fell after insiders were allowed to sell shares for the first time following the company’s initial public offering.

David Einhorn’s Greenlight Capital Inc. suffered in the past year by favoring gold-mining stocks over the precious metal, a strategy that Scotia Capital Inc. recommended last week. Two exchange-traded funds that Greenlight was buying in the third quarter of last year have declined since Sept. 30, 2011. Gold has risen about 9 percent during the same period in New York trading. Einhorn declined to comment on the performance.

Greenlight has stayed with one of the funds, the Market Vectors Gold Miners ETF, which invests in the metal’s biggest producers. The New York-based hedge fund is the third-largest shareholder even after cutting its stake by 17 percent in the second quarter, according to data compiled by Bloomberg.