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U.S. stocks end mixed on dovish Fed statement; Dow falls 0.19%

Published 07/30/2014, 04:22 PM
Updated 07/30/2014, 04:26 PM

Investing.com - U.S. stocks finished Wednesday mixed after the Federal Reserve issued a somewhat dovish take on the labor market, which allayed fears that interest rates were set to rise stemming from a robust gross domestic product report.

At the close of U.S. trading, the Dow 30 fell 0.19%, the S&P 500 index rose 0.01%, while the NASDAQ Composite index rose 0.45%.

The Volatility S&P 500 index, which measures the outlook for market volatility, was up 1.05% at 13.42.

Stocks fell earlier on news the U.S. economy grew at a robust clip in the second quarter, which sparked concerns interest rates may rise sooner rather than later, sentiments the Fed quickly quashed in afternoon trading.

The Commerce Department reported earlier that gross domestic product expanded at an annual rate of 4.0% in the three months to June, blowing past forecasts for a 3.0% reading. The contraction in the first quarter was revised to 2.1% from a previously reported 2.9%.

Personal consumption grew 2.5%, well above predictions of 1.9%, the report said, adding to the view that the economic recovery is gaining traction.

Despite improvements taking place in the economy, slackness remains in the labor market, which prompted the Federal Reserve on Wednesday to stick with its policy of making $10 billion cuts to its monthly bond-buying program as the year unfolds.

The Fed is currently purchasing $25 billion in Treasury and mortgage debt securities a month to spur recovery, which tends to weaken the dollar by keeping interest rates low.

Markets were hoping for a more upbeat take on the economy.

"Labor market conditions improved, with the unemployment rate declining further. However, a range of labor market indicators suggests that there remains significant underutilization of labor resources," the Fed's statement read.

Household spending is on the mend while business fixed investment is advancing, although recovery in the housing sector remains slow.

Fiscal policy continues to weigh on growth though the extent of which is diminishing, while consumer prices are stable.

"Inflation has moved somewhat closer to the Committee's longer-run objective. Longer-term inflation expectations have remained stable," the statement read.

"The Committee sees the risks to the outlook for economic activity and the labor market as nearly balanced and judges that the likelihood of inflation running persistently below 2 percent has diminished somewhat."

Elsewhere, payroll processor ADP reported that the U.S. private sector added 218,000 jobs in July, missing forecasts for a 230,000 reading.

Better-than-expected earnings from Twitter Inc (NYSE:TWTR) boosted technology stocks.

Leading Dow Jones Industrial Average performers included Nike Inc (NYSE:NKE), up 1.93%, Walt Disney Company (NYSE:DIS), up 1.17%, and Home Depot Inc (NYSE:HD), up 0.96%.

The Dow Jones Industrial Average's worst performers included Coca-Cola Company (NYSE:KO), down 1.82%, UnitedHealth Group Incorporated (NYSE:UNH), down 1.57%, and Pfizer Inc (NYSE:PFE), down 1.53%.

European indices, meanwhile, ended the day lower.

After the close of European trade, the DJ Euro Stoxx 50 fell 0.60%, France's CAC 40 fell 1.22%, while Germany's DAX fell 0.62%. Meanwhile, in the U.K. the FTSE 100 fell 0.50%.

On Thursday, the U.S. is to release the weekly report on initial jobless claims, as well as data on manufacturing activity in the Chicago area.

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