Fed spooks stocks with grim outlook
US stocks mostly fell in a volatile session yesterday after the Federal Reserve downgraded its assessment of the economic recovery as it vowed to keep cheap money flowing.
The market bounced between positive and negative territory as investors wrestled over the implications of the Fed’s statement in the afternoon on the economy and interest rates. The S&P 500 and Nasdaq finished lower, while the Dow eked out a tiny gain.
The Fed renewed its vow to hold benchmark interest rates exceptionally low, but its less bullish statement hurt a broad range of stocks. Banks were among the day’s weakest. The KBW Banks index dropped 0.7 per cent while Bank of America Corp lost 0.9 per cent to $15.43.
“There was definitely a more negative tone,” said Dan Cook, senior market analyst at IG Markets in Chicago. “The Fed doesn’t have a great outlook, but that wasn’t totally unexpected with the housing and labour market data we’ve seen lately.”
The Dow Jones industrial average edged up 4.92 points, or 0.05 per cent, to finish at 10,298.44. But the Standard & Poor’s 500 Index dipped 3.27 points, or 0.30 per cent, to close at 1,092.04. The Nasdaq Composite Index fell 7.57 points, or 0.33 per cent, to close at 2,254.23.
After the closing bell, shares of Dell rose 2 cents to $13.84 after giving a full-year outlook.
Paychex fell 3.6 per cent to $26.43 in extended-hours trading after the company reported its fourth-quarter results.
Nike lost 2.1 per cent to $71.02 after its results.
Bed Bath & Beyond shed 6.5 per cent to $38.78 after the bell, after it forecast a lacklustre second-quarter profit.
Earlier in the day, the Commerce Department said that sales of new homes fell to their lowest level ever in May. Homebuilders’ shares, however, rebounded after initial weakness on the news on the assumption that the worst was over for the crippled sector. Some analysts speculated the weakness in sales could prompt the government to renew the home buyer’s tax credit.
The S&P home builders ETF rose 1.2 per cent after falling to a four-month low after the data.