NEW YORK, Feb 29 (Reuters) - Sectors tied to inflation in the small and mid-capitalization space slumped on Wednesday after comments from U.S. Federal Reserve Chairman Ben Bernanke were viewed as a shift in the Fed’s highly accommodative monetary policy.
Shares were broadly flat, though energy and material shares plunged.
The Fed chairman’s comments acknowledging improvements in the labor market were seen as a step away from recent fiscal policy, although Bernanke said the economy would need to strengthen for the jobless rate to keep dropping.
The comments pushed the dollar higher and hit precious metal prices. Gold dropped 4 percent.
“The market wanted to hear the code words for further accommodative measures or something to that respect, and we didn’t hear them,” said Joshua Brown, vice president of investments at Fusion Analytics in New York.
“Because of that, traders are using the opportunity to get out of the inflation trade. It’s actually somewhat beneficial to the rest of the market to see some of the premium taken off commodity prices.”
The small-cap energy sector dropped 2.3 percent, while materials lost 0.9 percent. Mid-cap energy shares fell 1.1 percent.
Among the most active names, small-cap drilling company Gulf Island Fabrication Inc sank 7.3 percent to $30.36 while Approach Resources Inc lost 5.2 percent to $34.87.
The S&P MidCap 400 index dipped 0.2 percent, while the S&P SmallCap 600 index was flat. The benchmark S&P 500 slipped 0.1 percent.
In company news, First Solar sank 11 percent to $32.44 a day after reporting a quarterly loss and trimming its 2012 sales outlook.
SodaStream International Ltd plunged 14 percent to $40.73 after it reported a sharp decline in unit sales growth of its soda makers in the fourth quarter.
On the upside, both Cerus Corp and LSB Industries soared after their results. Cerus gained 10 percent to $3.88 and LSB surged 13 percent to $41.10.