US stocks end mixed
Wall Street ended an uneasy session mostly lower today and bond prices tumbled after the Federal Reserve suggested it might not be finished raising interest rates if they are needed to fight inflation caused by soaring energy and commodities prices.
The Fed’s decision to boost a key short-term lending rate to 5% was widely anticipated.
But investors were rattled by the central bank’s accompanying statement, which said more policy firming – or rate hikes – could be necessary to contain inflation.
The Fed indicated it would be closely watching economic data to determine its next step.
Investors had grown hopeful that recent signs of a cooling economy would prompt the Fed to stop lifting rates. The prospect of more increases dampened the market’s celebration and stocks briefly fell.
Ken McCarthy, chief economist for vFinance Investments, said the Fed would probably not raise interest rates at its June meeting to give it more time to assess the economy, adding that the central bank’s stance was ultimately positive for equities in the long term.
“The Fed realises that the tightening they’ve already done hasn’t had its full impact,” McCarthy said. “The numbers we’re getting now reflect the funds rate at 4%.”
“The Fed wants to see the effect of 4.5% or 5%, and we won’t see that until later this year.”
Bonds, which have been plagued by rising interest rates, sold off their earlier gains following the Fed’s statement. The yield on the 10-year Treasury note had fallen to 5.09% early in the session but recently was flat at 5.13%.
The Dow rose 2.88, or 0.02%, to 11,646.65. The Dow was 80 points from its best close of 11,722.98, reached on January 14, 2000.
Broader stock indicators declined. The Standard & Poor’s 500 index lost 2.29, or 0.17%, to 2,320.74, and the Nasdaq composite index sank 17.51, or 0.75%, to 2,320.74.
The chance for more interest rates increases weighed on the dollar, which fell against the Japanese yen. Meanwhile, gold prices climbed past a 25-year high of US$700 (€547.54) an ounce.
Although investors have always been mindful of economic data, forthcoming reports on wholesale and consumer prices, factory use and job growth could cause severe volatility in the coming weeks as Wall Street resumes its habit of trying to predict the Fed’s next interest rate move.
“If the economy doesn’t slow as expected, or inflation becomes a bigger problem for financial markets, the Fed has stated that it won’t hesitate to start raising rates again,” said Michael Sheldon, chief market strategist at Spencer Clarke LLC.
Crude oil futures rebounded as worries about overseas supply cutoffs countered a weekly government report showing increased oil and petrol reserves and greater refinery output. A barrel of light crude gained US$1.44 (€1.13) to US$72.13 (€56.42) on the New York Mercantile Exchange.
Cisco Systems posted a slight drop in quarterly profit but still managed to top Wall Street estimates. However, the company’s conservative outlook spooked tech investors. Cisco fell 93 cents to 20.75.
Disney said its earnings grew 12% last quarter, helped by strong television ratings and increased theme park attendance. Disney rose 53 cents to 30.11.
Federated said costs from acquiring May Department Stores caused it to post a slight loss for the first quarter. The Macy’s and Bloomingdale’s owner also pegged its second-quarter results below analyst targets. Federated dropped 97 cents to 77.98.
Whirlpool is closing three plants and slashing 4,500 jobs following its acquisition of rival appliance maker Maytag. Whirlpool lost 92 cents to 92.17.
Declining issues led advancers by about 9 to 7 on the New York Stock Exchange, where volume of 1.22bn shares leaped past the 1.14bn shares changing hands at the same point on Tuesday.
The Russell 2000 index of smaller companies lost 4.78, or 0.61%, to 775.94.
Elsewhere, Japan’s Nikkei stock average tumbled 1.39%, the FTSE 100 lost 0.36%, Germany’s DAX index fell 0.36% and France’s CAC-40 was lower by 0.64%.
