NEW YORK (PNN) - September 25, 2012 - A quiet day on Wall Street turned into the worst sell-off in three months after a Federal Reserve official said he doubted the bank’s effort to boost economic growth would work.

Charles Plosser, president of the Fed’s Philadelphia branch, told an audience Tuesday that the Fed’s effort to support the economy would likely fall short of its goals; and if the Fed looks ineffective, it could undermine future Fed action.

The speech probably startled some investors who had faith in the Fed’s latest plan, said Jack Ablin, chief investment officer at Harris Private Bank. The plan includes buying $40 billion in mortgage bonds each month until the economy improves. “So many investors have bought into the illusion,” he said. “It was like Plosser pulled up the curtain on the Wizard of Oz.”

The Standard & Poor’s 500 index lost 15.30 points, its fourth straight decline, to close at 1,441.59. The 1.05% drop was the worst for the S&P since June 25. The Dow Jones industrial average lost 101.37 points to close at 13,457.55. Caterpillar tugged the Dow down, losing 4%. The world’s largest maker of bulldozers and other heavy equipment said late Monday that slower economic growth around the world dampened its earnings forecast. Its stock sank $3.86 to $87.01.

Sagging profits could drag on the stock market in the coming weeks, said Phil Orlando, chief equity strategist at Federated Investors. Caterpillar joined a growing collection of companies that have lowered their earnings forecasts. FedEx, a bellwether of world trade, said that shipping has sunk to Depression-like levels. Railroad giant Norfolk Southern has also warned that falling shipments and sinking coal prices will likely drag down its earnings.

Wall Street analysts now estimate that corporate profits will sink this quarter from a year earlier. That would be the first such drop in three years.

The NASDAQ composite index dropped 43.05 points to 3,117.73. Google’s stock touched an all-time high in early trading, clearing $764, but closed the trading day at $749.16.

Treasury prices rose as traders shifted money into safe assets. The 10-year Treasury yield, the benchmark for mortgages and other loans, dipped to 1.67%, down from 1.71% late Monday.