Investor Anxiety Seen Across Asset Classes After FOMC Minutes

On Wednesday, we are seeing the first real signs of investor anxiety since the beginning of the 2012 rally in risk assets. Across markets, there are indications of nervousness and caution after yesterday's FOMC minutes indicated that the Fed is in a holding pattern and more easing measures are not likely in the near-term. In the wake of the 2008 financial implosion, the markets have become extremely sensitive to the various monetary machinations of the Federal Reserve. An argument could be made that the unprecedented intervention of the central bank has fundamentally distorted the entire investment process. Investors are clearly apprehensive about the prospect of the Fed turning off the money spigot, and this could trigger the next wave of volatility. Recall that the deep sell-off last summer was triggered in large part by the end of QE2. A similar decline could be forthcoming if the markets become convinced that there will be no QE3. On Wednesday, this possibility is being priced into various asset classes. At last check, the Dow Jones Industrial Average was hovering near session lows, nursing a loss of roughly 150 points and a breach of the 13,000 level appears to be a possibility. The S&P 500 has fallen nearly 17 points and broken through the key psychological 1,400 level. The hardest hit of the major averages has been the NASDAQ Composite, which was last down 1.75%. The nervousness can also be seen in the Treasury market where buyers have snapped up U.S. debt across maturities. In particular, the yield on the 5-Year note has fallen sharply to 1.04%, a loss of 7.4 basis points on the day. Not surprisingly, commodities are getting hit hard as investors trim exposure. The caution is also having an upward effect on the U.S. Dollar. At last check, Dollar Index futures were up 0.40% to $79.96. The losses in the commodity complex have been most pronounced in gold and silver. COMEX gold futures were down more than $53, or 3.20%, to $1,618.00. Silver futures have shed 6.31% and were last trading at $31.17. The corresponding ETFs that track gold and silver, the SPDR Gold Trust

and iShares Silver Trust

, have lost 1.73% and 4.27%, respectively. Crude oil is also reacting to the sell-off. NYMEX crude futures, the U.S. benchmark, have shed 2.40% to $101.51 while ICE Brent contracts were down 1.60% to $122.86. Copper futures, which are particularly sensitive to the outlook for the global economy, have also been trending lower throughout Wednesday's trading session. At last check, copper had fallen 3.15% to $3.80. Given the persistence of the rally in risk assets in 2012, it might be a little premature for investors to hit the panic button in the wake of today's sell-off, but caution may be warranted. While the move lower could just be a shallow pullback, last August's market meltdown is likely still fresh in the minds of many. A repeat performance is not out of the question.