NEW YORK — A recurrence of investors’ anxiety about the economy gave Wall Street its biggest loss in five weeks.
The major indexes fell 1 percent Tuesday as investors feared that the market’s steep gains in the past month could unravel if the economy doesn’t show more signs of strengthening. Warnings about the health of banks and uneasiness ahead of the Federal Reserve’s economic statement today led investors to dump financial stocks and wade into defensive areas such as consumer-staples companies and government debt.
Meanwhile, a record 10th straight monthly drop in wholesale inventories brought a fresh reminder that a recovery in the economy is likely to be gradual.
But many analysts said investors weren’t panicking. They were taking a much- needed pause after a rally that seemed to be going at breakneck speed. The Standard & Poor’s 500 index had reached its highest level since last fall, rising 15 percent in four weeks and 49 percent from a 12-year low in early March.
“This sort of give-and-take is quite healthy,” said Erik Davidson, managing director of investments at Wells Fargo Private Bank in Carmel, Calif. “You’re up 50 percent in five months. That’s 10 percent a month. In quote-unquote normal markets, that’s five years’ worth of returns.”
Moreover, traders often become jittery when the Fed policymakers meet to discuss interest rates. It is widely expected that the central bank will hold interest rates at their historic low of essentially zero, but investors are waiting to see what the Fed has to say about the economy when the meeting concludes today.
The Dow Jones industrial average fell 96.50, or 1 percent, to 9,241.45. It was down 121 points at its low of the day. The Dow slipped 32 points Monday.
The broader S&P 500 fell 12.75, or 1.3 percent, to 994.35.
It was the biggest drop for the Dow and the S&P 500 index since July 7.
The Nasdaq composite fell 22.51, or 1.1 percent, to 1,969.73, while the Russell 2000 index of smaller companies fell 9.75, or 1.7 percent, to 562.12.
“It’s pretty clear that a lot of people are pulling back any bets pending what is going to happen with the Fed,” said Max Bublitz, chief strategist at SCM Advisors in San Francisco.
About three stocks fell for every one that rose on the New York Stock Exchange, where consolidated volume came to 5.8 billion shares, compared with 5.4 billion Monday.
Crude oil fell $1.15 to settle at $69.45 a barrel on the New York Mercantile Exchange.
