NEW YORK -- Stocks fell Wednesday as investors were left uneasy by news that some Federal Reserve policymakers were willing to start raising short-term interest rates sooner than previously expected.
The market was mixed most of the day, then turned lower after 2 p.m., when the Fed released the minutes from its January policy meeting.
The minutes revealed that some policymakers "raised the possibility that it might be appropriate to increase the federal funds rate relatively soon."
That came as an unwelcome surprise to many investors, who haven’t had to worry about increases in the Federal Res-
erve’s benchmark short-term interest rate for about five years.
"The working assumption among investors was that the Fed was going to keep short-term interest rates as low as possible for as far as the eye can see," said Jack Ablin, chief investment officer at BMO Private Bank, which oversees $66 billion in assets.
The Dow Jones industrial average lost 89.84 points, or 0.6 percent, to 16,040.56. It had been up as much as 95 points earlier in the day. The Standard & Poor’s 500 index fell 12.01 points, or 0.7 percent, to 1,828.75 and the Nasdaq composite fell 34.83 points, or 0.8 percent, to 4,237.95.
The Federal Reserve has kept the federal funds rate, the interest banks charge each other to borrow money, near zero since December 2008 in an effort to support the U.S. financial system by keeping borrowing costs low. The rate has remained close to zero since then.
In more normal years, short-term interest rates were the Fed’s main tool for regulating the U.S. economy. Even small changes in its benchmark borrowing rate could have an impact throughout the economy by raising or lowering interest rates on many kinds of loans, including home mortgages and business loans. Since the financial crisis, the Fed has turned to less traditional ways of stimulating the economy, including the Fed’s current bond-buying program.