Major Averages Close Mixed After Fed Leaves Rates Unchanged – U.S. Commentary

Major Averages Close Mixed After Fed Leaves Rates Unchanged – U.S. Commentary

Following the rally seen in the previous session, stocks fluctuated over the course of the trading session on Thursday. Despite the choppy trading, the Dow inched up to its best closing level in a month.

The major averages ended the day on opposite sides of the unchanged line. While the Dow crept up 10.92 points or less than a tenth of a percent to 26,191.22, the Nasdaq slid 39.87 points or 0.5 percent to 7,530.88 and the S&P 500 fell 7.06 points or 0.3 percent to 2,806.83.

The mixed performance on Wall Street came after the Federal Reserve announced its widely anticipated decision to leave interest rates unchanged.

Citing realized and expected labor market conditions and inflation, the Fed decided to maintain the target range for the federal funds rate at 2 to 2.25 percent.

The Fed’s accompanying statement noted a slowdown in the pace of growth in business investment, but the central bank reiterated further gradual increases in interest rates remain appropriate.

“Overall, the statement suggests that the Fed is still on track to continue raising interest rates gradually, with the next hike coming at its December meeting,” said Michael Pearce, Senior U.S. Economist at Capital Economics. “We anticipate that will be followed by two rate hikes in the first half of 2019.”

He added, “By the middle of next year, however, we expect economic growth to slow below its potential pace, which would force the Fed to the sidelines.”

CME Group’s FedWatch tool currently indicates a more than 70 percent change the Fed will raise rates by a quarter point following a two-day meeting scheduled for December 18th and 19th.

On the U.S. economic front, the Labor Department released a report showing a slight decrease in initial jobless claims in the week ended November 3rd.

The report said initial jobless claims edged down to 214,000, a decrease of 1,000 from the previous week’s revised level of 215,000.

Economists had expected jobless claims to dip to 213,000 from the 214,000 originally reported for the previous week.

Sector News

Tobacco stocks showed a substantial move to the downside on the day, dragging the NYSE Arca Tobacco Index down by 4.8 percent. With the slump, the index fell to its lowest closing level in two months.

Significant weakness was also visible among energy stocks, which moved sharply lower along with the price of crude oil. Crude for December delivery tumbled $1 to $60.67 a barrel.

Reflecting the weakness in the energy sector, the Philadelphia Oil Service Index plunged by 3.6 percent, the NYSE Arca Oil Index plummeted by 2.8 percent and the NYSE Arca Natural Gas Index dove by 2.3 percent.

Housing stocks also saw considerable weakness on the day, resulting in a 2.4 percent drop by the Philadelphia Housing Sector Index.

Homebuilder D.R. Horton (DHI) led the housing sector lower after reporting fiscal fourth quarter earnings that matched analyst estimates but weaker than expected revenues.

Networking and steel stocks also moved notably lower, while most of the other major sectors showed more modest moves.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly higher during trading on Thursday. Japan’s Nikkei 225 Index jumped by 1.8 percent, while Hong Kong’s Hang Seng Index rose by 0.3 percent.

Meanwhile, the major European markets turned in a mixed performance on the day. While the U.K.’s FTSE 100 Index climbed by 0.3 percent, the French CAC 40 Index edged down by 0.1 percent and the German DAX Index fell by 0.5 percent.

In the bond market, treasuries moved to the downside following the Fed announcement. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, rose by 2.1 basis points to a nine-year closing high of 3.234 percent.

Looking Ahead

Trading on Friday may continue to be impacted by reaction to the Fed announcement along with a preliminary report on consumer sentiment in November.

Earnings news from Disney (DIS) may also attract attention, with the entertainment giant among the companies releasing their quarterly results after the close of today’s trading.

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