Stocks Settle at One-Month Low as Fed Rate Fears Spark Selloff
NEW YORK (TheStreet) -- Wall Street was bruised and battered on Tuesday as uncertainty over a Federal Reserve rate hike timeline played havoc with stocks. Speculation over the Fed pushed the dollar to 12-year highs, which then punished crude oil and other commodity prices.
All benchmark indexes settled at one-month lows with the S&P 500 and Dow Jones Industrial Average wiping out year-to-date gains.
The Nasdaq slid 1.4% on the 15th anniversary of its March 2000 peak. The Chicago Board Options Exchange's Volatility IndexI:VIX, commonly known as the "fear index," spiked more than 8% to 16.32.
The U.S. dollar surged to its highest level since 2003 on the prospect of higher rates. The greenback was up 1.4% against the euro, 0.42% against the British pound, 1.2% against the Aussie dollar, and 1.3% against the Swiss franc.
The Fed will hold a two-day meeting beginning on March 17, after which investors hope Fed Chair Janet Yellen will give further hints as to when a rate hike could occur. Economists anticipate the Fed will remove its "patient" language from its release, a signal that could mean a mid-summer rate hike.
"Different reactions tell me that there is simply no consensus in markets about what will happen when the Fed starts hiking rates," said Torsten Sløk, chief international economist at Deutsche Bank. "From a financial stability perspective this is worrying because this tells us that a significant amount of investors hold high-conviction views that will turn out to be wrong."
Jim Cramer says there is no way the Fed can raise rates yet given that the strong dollar will continue to cause headwinds for the economy. He makes his case in an article for Real Money Pro. Click here for more (paywall).
West Texas Intermediate was down 3.4% to $48.29 a barrel -- its low for the month -- as the dollar surged. The Energy Information Administration cut its 2015 average estimates for the commodity to $52.15 a barrel from $55.02, and $70 from $71 over 2016. Prices were also under pressure after OPEC representatives indicated that a cut to production was unlikely at a Doha energy forum on Tuesday.
"There is still time for that stance to shift ahead of the scheduled June 5 summit, but it does suggest they may need to see lower prices to convince them of the need to change course," said Citi analyst Timothy Evans.
Gold spot prices tumbled 0.5% to $1,160.70 an ounce, COMEX silver futures slid 0.77% to $15.66 an ounce, and COMEX copper futures fell 1.7% to $262.40 a pound.
Urban Outfitters (URBN) - Get Report was the best performer on the S&P 500, surging 11.5%. The retailer reported a better-than-expected quarter with sales above a record-breaking $1 billion and comparable-store sales up 6%.
Swiss banking giant Credit Suisse (CS) - Get Report jumped 6.7% after CEO Brady Dougan confirmed he will step down in June. Dougan has overseen several legal dramas and poor performance in his eight-year tenure. Over the past 12 months, shares have fallen 27%.
Barnes & Noble (BKS) - Get Report slid 10% as quarterly profit missed estimates and revenue dropped 1.5%. For the full year, the bookstore chain expects comparable-store sales to be in the negative low-single digits, while its Nook branch is expected in the red again.
Lumber Liquidators (LL) - Get Report spiked nearly 6% after scheduling a conference call for Thursday to discuss its first-quarter outlook. The company also will address product safety after a damning 60 Minutes report earlier in the month.
Twitter (TWTR) - Get Report was 3.7% lower after purchasing live-video streaming app Periscope for around $100 million, according to TheWall Street Journal. The price tag makes it one of Twitter's most expensive acquisitions.
Jim Cramer says a Fed rate hike risks contagion. He makes his case in an article for Real Money Pro. Click here for more (paywall).
