Stocks Drop After Fed Minutes

U.S. stocks tumbled Wednesday as minutes from last month's Federal Reserve meeting hinted at the need for more rate hikes, adding to worries about surging gasoline prices and the weak housing market.

The Dow Jones industrial average fell 89.23 points, or 0.71 percent, to end at 12,484.62. The Standard & Poor's 500 Index dropped 9.52 points, or 0.66 percent, to finish at 1,438.87. The Nasdaq Composite Index declined 18.30 points, or 0.74 percent, to close at 2,459.31.

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Concern that Citigroup's long-anticipated restructuring might not be enough to energize its lackluster stock helped to drag down the Dow, ending an eight-day streak of gains. Citigroup shares ended down 1.2 percent.

Stocks had been down for most of the day, then they raced sharply lower in mid-afternoon when minutes from the Fed's latest meeting showed policy-makers saw both greater risks of slower economic growth and uncertainty that core inflation would recede.

"The market started the year thinking that the next move was a rate cut and now, who knows?" said Emanuel Weintraub, managing director of Integre Advisors, in New York.

"The Fed news was not good. You're really in a box here. At this point, it seems your 'best case' scenario is inflationary environment and your worst case is a stagflationary environment."

The Dow average's loss is its biggest daily percentage fall since March 28. The Dow had risen for eight straight sessions, its longest string of gains in four years, although the increases in several sessions were modest.

U.S. government data showed a larger-than-expected drop in gasoline supplies last week, which pushed gasoline futures up to an eight-month high.

Shares of Citigroup lost 1.2 percent to $51.80, while the S&P financial index dropped 0.8 percent.

Citigroup helped pull down the Dow after the bank said it will eliminate 17,000 jobs, or 5 percent of its work force. The restructuring news had been expected for several weeks and helped push Citigroup's shares up 7.5 percent since mid-March.

The stocks of other companies in the financial and housing-related sectors fell after the National Association of Realtors said tougher lending standards will slow the recovery in the U.S. housing market and data showed a fourth-straight weekly decline in U.S. mortgage applications.

The Dow Jones U.S. Home Construction index was down nearly 2 percent.

The housing slump will likely slow the U.S. economy, but will not trigger a recession, the International Monetary Fund said Wednesday. The IMF lowered the forecast it made in September for 2007 GDP expansion to 2.2 percent from 2.9 percent.

Trading was moderate on the New York Stock Exchange, with about 1.57 billion shares changing hands, below last year's estimated daily average of 1.84 billion, while on Nasdaq, about 2.01 billion shares traded, below last year's daily average of 2.02 billion.

Declining stocks beating advancing ones by a little more than 2 to 1 on the NYSE. On the Nasdaq, about two stocks fell for every one that rose.

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