NEW YORK — A quiet day on Wall Street turned into the worst sell-off in three months after a Federal Reserve official said he doubted the bank’s effort to boost economic growth would work. NEW YORK — A quiet day
NEW YORK — A quiet day on Wall Street turned into the worst sell-off in three months after a Federal Reserve official said he doubted the bank’s effort to boost economic growth would work.
Charles Plosser, president of the Fed’s Philadelphia branch, told an audience Tuesday the Fed’s effort to support the economy would likely fall short of its goals. And if the Fed looks ineffective, it could undermine future Fed action.
The speech probably startled some investors who had faith in the Fed’s latest plan, said Jack Ablin, chief investment officer Harris Private Bank. The plan includes buying $40 billion in mortgage bonds each month until the economy improves.
“So many investors have bought into the illusion,” he said. “And it was like Plosser pulled up the curtain on the Wizard of Oz.”
The Standard & Poor’s 500 index lost 15.30 points, its fourth straight decline, to close at 1,441.59. The 1.05 percent drop was the worst for the S&P since June 25.
The Dow Jones industrial average lost 101.37 points to close at 13,457.55. Caterpillar tugged the Dow down, losing 4 percent. The world’s largest maker of bulldozers and other heavy equipment said late Monday that slower economic growth around the world dampened its earnings forecast. Its stock sank $3.86 to $87.01.
On Tuesday, a batch of encouraging economic reports gave the stock market a nudge in morning trading. House prices rose in major cities for a third straight month, and a gauge of consumer confidence came in surprisingly high.
More surprising than those two economic reports was the Richmond Federal Reserve’s strong reading on regional manufacturing, a recent trouble spot, said Phil Orlando, chief equity strategist at Federated Investors.
“Look at that. There were three data points on the economy and we crushed them,” said Phil Orlando, chief equity strategist at Federated Investors.
The Nasdaq composite index dropped 43.05 points to 3,117.73. Google’s stock touched an all-time high in early trading, clearing $764, but closed the trading day at $749.16.
Apple, the largest public company in the world, lost $17.25, or 2.5 percent, to close at $673.54.
