Fed's unexpected news sends Dow reeling

Traders work on the floor of the New

Traders work on the floor of the New York Stock Exchange n Wednesday. Stocks ended the day down after news that Federal Reserve officials suggested the central bank scale back its effort to keep borrowing costs low. (Feb. 20, 2013) (Credit: Bloomberg)

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The stock market posted its biggest loss this year on news that Federal Reserve officials suggested the central bank scale back its effort to keep borrowing costs low.

Minutes from the Fed's January meeting seemed to catch investors by surprise when they were released at 2 p.m. Wednesday. Several Fed policymakers worried that the bank's program of buying $85 billion of bonds each month could eventually unsettle financial markets or cause the bank to take losses.

Even so, most Fed officials thought the economy faced fewer risks than in December.

Judging by the market's reaction, the Fed appears to be closer to ending its support for the economy than traders had expected, said Dan Greenhaus, chief global strategist at the brokerage BTIG. "We're at a point now where we're discussing how we're going to end this, not whether it's going to end," he said.

By buying bonds, the Fed drives up their prices and lowers interest rates, which have stayed at record lows. That keeps costs low for mortgages and other types of loans.

The Dow Jones industrial average fell 108.13 points to 13,927.54; the Standard & Poor's 500 index fell 1.54 percent to 1,511.95; the Nasdaq composite fell 1.53 percent to 3,164.

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