NEW YORK — Stocks and government bonds fell Tuesday as commodities rallied to two-year highs.
Silver, soybeans and copper jumped to levels last seen in October 2008 as investors moved money into hard assets in anticipation that a massive economic-stimulus plan announced by the Federal Reserve last week will continue to weaken the dollar.
Investors are expecting that commodities will hold their value even if the dollar falls.
The Fed plans to buy $600 billion in U.S. government bonds over six months in an effort to push interest rates even lower and encourage borrowing and spending. It’s a tactic called quantitative easing, one that the Fed used successfully in 2008 to restore confidence in financial markets at the height of the credit crisis.
“The market is still being driven by the Fed’s actions, and it will be for a while,” said Dirk van Dijk, senior equity strategist at .
The Dow Jones industrial average fell 60.09, 0.5 percent, to 11,346.75. The broader Standard & Poor’s 500 fell 9.85, 0.8 percent, to 1,213.40, while the technology-focused Nasdaq composite fell 17.07, 0.7 percent, to 2,562.98.
Stocks rose earlier after inventories at U.S. wholesalers rose twice as much as forecast in September, Commerce Department figures showed in Washington. The 1.5 percent increase followed a revised 1.2 percent rise in August.
Treasury prices fell despite a strong auction of 10-year notes. Investors are concerned that demand may be weak for 30-year bonds in an auction upcoming Wednesday. The price of the 30-year bond was down sharply, losing about two full points, or $2 per $100 in face value. Its yield rose to 4.23 percent, the highest level since June 10.
The 30-year bond wasn’t one of the maturities being heavily targeted by the Fed’s purchasing program announced last week, and its long maturity makes it more sensitive to inflation than shorter-term notes.
Many investors worry that the Fed’s bond-buying program could lead to a jump in inflation, which would erode the value of all bonds since their fixed payouts would become worth less over time.
