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Stocks Fall on Fed Inflation Concerns

Ian Wyatt

Few things send investors running for the hills like the word “inflation.” That’s why today’s Fed minutes sent U.S. markets spiraling downward late Wednesday.

The S&P 500 and the Nasdaq each had their worst days yet in 2013, as both indexes fell more than a percent. The declines were much more modest until the FOMC released the minutes from its January meeting shortly after 2 p.m. eastern today.

The S&P finished the day at 1,512, down 1.2% from yesterday. The Nasdaq crashed even harder, plummeting 1.5%.

Here’s what sparked the sell-off: the Fed minutes revealed that several FOMC members are concerned that the ongoing bond-buying program could eventually precipitate higher inflation rates. The committee still voted 11-1 to keep its bond-buying program intact until the job market improves. But the inflation fears of a few were enough to scare investors off today.

Realistically, it probably wouldn’t have taken much to spark a sell-off – not with stocks hitting a fresh five-year high yesterday. A correction was long overdue.

Many market analysts have warned about the inflation risks the Fed’s quantitative easing presents since it was announced in September. Now that the record shows that even several FOMC members share those inflation fears, it was just the catalyst to jumpstart a sudden sell-off.