they suggest that U.S. market more "likely" down before Friday..
Brutal day on Wall Street
Dow slumps 280 points, Nasdaq and S&P 500 tumble as investors eye Fed minutes, drop in confidence index, weak housing, mortgage and credit markets. By Alexandra Twin, CNNMoney.com senior writer August 28 2007: 6:16 PM EDT
NEW YORK (CNNMoney.com) -- Stocks got battered on Tuesday after the minutes from the last Federal Reserve policy meeting failed to reassure investors worried about weak housing, consumer confidence reports and ongoing credit and mortgage market woes.
The Dow Jones industrial average (down 280.28 to 13,041.85, Charts) lost 2.1 percent. The broader S&P 500 (down 34.43 to 1,432.36, Charts) index and the tech-fueled Nasdaq Composite (down 60.61 to 2,500.64, Charts) both lost nearly 2.4 percent.
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Treasury prices jumped, as investors sought safety in bonds. The dollar was mixed versus other major currencies. Oil and gold prices fell.
After the close, shares of Dillard's (Charts, Fortune 500) fell after the department store operator reported a quarterly loss, versus a profit a year ago.
Shares of PDL Biopharma (Charts) slumped 15 percent after the biotech company withdrew its 2007 financial guidance, said it will sell its marketed drugs and said that an experimental drug in late-stage trials failed.
Fed: Don't panic. We're here Stocks - already vulnerable after last week's big rally - had fallen through the mid afternoon, as investors eyed reports that showed a big drop in home prices, weaker consumer confidence and more problems for the financial sector.
The 2:00 p.m. ET release of the minutes from the last Fed meeting added fuel to the fire, despite offering little new information on the central bank's outlook on the economy. (Read the minutes).
The minutes from the Aug. 7 meeting showed that at the time, the bankers were not overly worried about the impact of the subprime and credit market turmoil on the economy. Although, the Fed did state that if the economy should deteriorate, it was prepared to cut rates.
The selloff Tuesday may have reflected investor disappointment that -at least in early August - the Fed did not appear to be closer to cutting rates and was not more concerned about the financial markets, said Michael Sheldon, chief market strategist at Spencer Clarke.
However, things changed shortly after that, Sheldon said. Just 10 days later, the Fed cut the discount rate, which affects bank loans. The move raised hopes that the central bank may cut the federal funds rate - which impacts consumer loans - at its Sept. 18 policy meeting.
"We think the Fed will ease the fed funds rate by 25 basis points at the September meeting," said Timothy Ghriskey, chief investment officer at Solaris Asset Management. There are 100 basis points in a percentage point.
Ghriskey said that while a cut would appease the markets, it wouldn't necessarily suggest a big change in fed policy. "If the economy picks up enough steam, they could end up lifting rates again," he said.
The next big event will be Fed chair Ben Bernanke's comments Friday from the annual economic symposium in Jackson Hole, Wyoming.
Ahead of that, stocks could slide further.
"Most of the major markets have broken a short-term uptrend," Sheldon said, "and with few investors likely to help support the market over the next few days, the near-term direction is more likely to be down than up."
The price of walking away Stocks fell Monday on a weak July existing home sales report. Tuesday brought more evidence of erosion in the sector after a Standard & Poor's report showed that home prices fell 3.2 percent in the second quarter versus a year ago.
A separate report showed consumer confidence slumped in August to a 1-year low, reflecting a brutal summer on Wall Street in which stocks slumped amid worries about the credit and mortgage markets and oil prices surged.
In addition to the week's events, stock investors were also reacting to last week's rally, the analysts said, in which the major gauges each jumped more than 2 percent.
"We had a strong rally off the bottom in the last week or so after the Fed cut the discount rate," Ghriskey said. "The pullback we've seen this week is a little profit taking in what is an extremely slow period for the markets."
He said that many Wall Street professionals were now taking vacations after deferring them in early August due to the market turmoil.
Stocks bottomed out in mid-August, with the S&P 500 and Dow industrials carving out the technical definition of a correction - a drop of at least 10 percent off the highs.
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