NEW YORK — Traders put their September stock rally on hold and moved into Treasurys and gold Wednesday, a day after the Federal Reserve said it was ready to take more action to boost the economy.
The Dow Jones industrial average fell 21 points.
With no new economic data out Wednesday and the Fed’s announcement late Tuesday having a bigger impact on the bond and currency markets, Bob Auer, portfolio manager of the Auer Growth Fund, said it was natural for stocks to pause.
“People are saying, ‘I’ve got some profits. Let’s book ’em,’ ” Auer said.
The Standard & Poor’s 500 was dragged to its biggest decline in two weeks as a weakening earnings outlook for technology and financial companies overshadowed speculation that the Federal Reserve will take steps to bolster the economy.
The S&P 500 slid 0.5 percent, the most since Sept. 7, to 1,134.28, a day after the Fed said it’s willing to ease monetary policy further to spur growth.
“We’re navigating the slow- growth economy and trying to avoid pitfalls,” said Jack Ablin, chief investment officer at Chicago-based Harris Private Bank. “The Fed will do whatever it can to avoid a double-dip recession, but it can’t keep on buying debt forever.
“This is a ‘reflation’ story of weaker dollar, higher commodities prices and lower interest rates. This is not an environment that suggests a huge rally for stocks.”
The S&P 500 has surged 11 percent from this year’s low July 2 as concern eased that U.S. unemployment and less spending from indebted European nations would stall the global economic recovery. The gauge has gained 1.7 percent so far this year, leaving it 6.8 percent below its peak for 2010.
The Dow fell 21.72, or 0.2 percent, to 10,739.31. The Nasdaq composite fell 14.80, or 0.6 percent, to 2,334.55.
Stocks reversed earlier gains after the Federal Housing Finance Agency said U.S. home prices dropped 3.3 percent in July from a year earlier, the eighth consecutive decline, as foreclosed properties flooded the market. Prices fell 0.5 percent from June, more than the projected drop of 0.2 percent in a Bloomberg survey.
Entering Wednesday, the Dow had risen in 13 of the past 15 days and climbed 7.5 percent in September.
The Fed didn’t announce specific actions to strengthen the economy, but investors interpreted its statement as a signal that the central bank could step up its bond-purchasing program down the line.
Investors had little incentive to move more money into stocks, so they turned their focus to bonds and gold. Treasurys rose again, pushing their yields lower, and gold climbed to another record. If the Fed starts purchasing bonds, it would have the dual effect of raising demand for Treasurys and hurting the dollar’s value.
