U.S. stocks ended lower on Friday following the Federal Reserve’s interest rate announcement on Thursday. The central bank opted not to raise interest rates at this time, citing weak inflation and slowing global growth as well as its effect on the U.S. economy. Concerns over global growth weighed down on stocks and lifted the price of government bonds.
The U.S. economy is currently on its seventh consecutive year of expansion, as interest rates are kept extremely low. With a 2.2% annual growth rate, comfortably low 5.1% unemployment, as well as accelerating automobile and home sales, some analysts are speculating as to what could change the Fed’s policy. The most agreed-upon factors include a slightly lower and more stable dollar, steady energy prices, and more improvement on the employment front.
The Dow Jones industrial average declined 290.16 points, or 1.7%, to close the day at 16,384.58. Over the week, the Dow was down 0.3%. For the entire year so far, the index is down 8.1%. The Standard & Poor's 500 Index fell 32.17 points, or 1.6%, to trade at 1,958.03. Over the week, the index fell 0.2%. For the year, the S&P is down 4.9%. The NASDAQ Composite was lower by 66.72 points, or 1.4%, to trade at 4,827.23. Bucking the trend, the NASDAQ remained flat and for the year is up 1.9%.
The U.S. dollar tumbled after the Federal Reserve’s announcement. The euro edged up on the dollar, but wasn’t able to hold on to the gains, most likely due to the fact that the Federal Reserve’s previous statements regarding a rate hike this year was very clear in favoring such a move. The dollar recovered after Thursday’s announcement as it added 0.3% against a basket of six of its major peers as part of the dollar index. Early on Monday the dollar fell 0.1% against the yen, fetching 119.86 yen on the dollar. The euro remained relatively unchanged at $1.1312.
Oil prices saw their biggest daily decline in nearly three weeks on Friday despite the decision not raise U.S. interest rates and data showing a continued slump in the number of active U.S. drilling rigs. Some analysts posit that the uncharacteristic decline following the Fed’s announcement suggests that commodity traders have taken note of the Federal Reserve’s weak outlook on inflation and the global economy. However, prices have rebounded since, adding 64 cents, or 1.42%, to trade at $45.66 a barrel.
U.S. home sales will be available later today, followed by eurozone consumer confidence on Tuesday. U.S. and eurozone manufacturing data will be released on Wednesday followed by U.S. durable goods orders and jobless claims. Friday holds the biggest data releases with the release of U.S. GDP data and an interest rate decision from the Bank of Japan.