The Dow suffers its biggest drop in nearly three weeks

There’s generally a downbeat mood on Wall Street.

NEW YORK (AP) — Volatility returned to Wall Street on Tuesday, sending stocks plunging as investors grew more uneasy about the economy and whether the Federal Reserve will take the steps needed to prevent credit market problems from spreading further. The Dow Jones industrials fell 280 points.

The stock market found little to assuage concerns in minutes from the Fed’s last meeting, released during afternoon trading. The major indexes’ losses steepened after investors parsed the minutes for signs of a possible cut in interest rates.

Faint hope

There had been some hope on the Street that Fed policymakers might have sent a stronger signal they were more willing to cut interest rates to help calm turbulent market conditions. But in the minutes from the Federal Open Market Committee’s on Aug. 7 meeting, while the central bank noted the turmoil in the markets and said, “to the extent such a development could have an adverse effect on growth prospects, might require a policy response,” it didn’t discuss a cut in the benchmark federal funds rate that Wall Street has wanted.

The meeting predated a number of actions taken by the central bank to try to alleviate market volatility, including the Aug. 17 lowering of the discount rate, the interest the Fed charges banks to borrow money. Wall Street, despite a calmer week after that step, seems to be growing more dissatisfied because the Fed has not yet lowered the funds rate — and with a return to the intense volatility seen earlier this month may be trying to force the Fed to act.

“Investors are getting whipped side to side because their expectations, which are changing almost on a daily basis, aren’t being met,” said Chris Johnson, chief investment strategist at Johnson Research Group. “We’ve gone from the roof is on fire to the Fed is riding in on a white horse, and what we’re seeing now is a reality check.”

Plagued by worries

Stocks were down the entire session on further worries about the economy. The Conference Board’s report that consumer confidence sagged in August amid volatile financial markets and ongoing housing problems added to the downbeat mood on the Street. Keeping alive credit worries, a Standard & Poor’s housing index showed that U.S. home prices in the second quarter posted the sharpest decline since 1987.

The Dow fell 280.28, or 2.10 percent, to 13,041.85, its biggest drop since Aug. 9. Stocks rose in fairly subdued trading last week, but began to pullback Monday on sluggish economic data.

Broader stock indicators were also lower. The Standard & Poor’s 500 index was down 34.43, or 2.35 percent, at 1,432.36, and the Nasdaq composite index shed 60.61, or 2.37 percent, to 2,500.64.