Markets closed in the red on Wednesday as Fed decided to leave the interest rates unchanged at the culmination of its two-day meeting. Further, Fed’s Chief Jerome Powell made it clear that there was no reason to expect a rate cut by the Fed in the near term.
He also stated that the country’s economy was in good shape. At the same time the Fed acknowledged cooling inflation levels in the economy but brushed it off as temporary. The three major benchmarks ended in the negative territory.
The Dow Jones Industrial Average (DJI) decreased 0.6%, to close at 26,430.14. The S&P 500 decreased 0.8% to close at 2,923.73. The tech-laden Nasdaq Composite Index closed at 8,049.64, declining 0.6%. The fear-gauge CBOE Volatility Index (VIX) increased 7.3% to close at 14.08. Decliners outnumbered advancers on the NYSE by a 1.17-to-1 ratio. On Nasdaq, a 1.46-to-1 ratio favored declining issues.
How Did The Benchmarks Perform?
The Dow dropped 162.8 points to close in the red. Losses for the 30-stock index were rather broad-based. Moreover, the Dow posted its worst day since Apr 9.
The S&P 500 lost 22.1 points to also end in the red. Of the 11 major sectors of the S&P 500, 10 ended in negative territory, with energy leading the decliners. The Energy Select Sector SPDR Fund (XLE (NYSE:XLE)) decreased 2% on Wednesday. The broader index snapped its three-day streak of record closes and posted its worst day since Mar 22.
Meanwhile, the Nasdaq tanked 45.8 points to close in the red. This was the first time since Mar 25 that the tech-heavy index closed in the negative territory for two consecutive sessions. A broad-based decline in the tech sector weighed on the Nasdaq. Tech bigwigs like Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB) dipped 0.8% and 0.2%, respectively. Amazon carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Fed leaves Interest Rates Unchanged
At the end of its two-day policy meeting members of the Fed voted unanimously to keep the benchmark interest rates unchanged in the range of 2.25% to 2.5%. Senior officials from the Fed remained optimistic about the U.S. economy.
Last week’s U.S. GDP report showed that the metric rose 3.2% and surprised the economists. Meanwhile, softness in inflation prevailed as core inflation, measured by the personal consumption expenditure price index declined to 1.6 in March to its 19-month low.
Despite Fed’s acknowledgement that core as well as overall inflation levels “have declined and are running below,” Fed Chief Jerome Powell stated in the press conference post the meeting that he believed that the U.S. was “on a good path.” He further stated that a cool-down inflation levels is “transient.” Also, he said that he saw “no strong case” in expecting a rate-cut by the Fed in the near term.
Meanwhile, the CME Group (NASDAQ:CME) predicted that there is a 59.8% probability that there may be a slash in interest rates by the Fed. Fed’s indication to not alter the decision of its “patient” rate-hike approach and a hawkish stance related to inflation levels in the economy weighed on the investor sentiment.
Economic Data
On the economic data front, the Institute of Supply Management’s (ISM) manufacturing index fell to 52.8% in April, its lowest reading since October 2016. Further, U.S. construction spending decreased 0.9% in March.
Zacks' Top 10 Stocks for 2019
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-holds for the year?
Who wouldn't? Our annual Top 10s have beaten the market with amazing regularity. In 2018, while the market dropped -5.2%, the portfolio scored well into double-digits overall with individual stocks rising as high as +61.5%. And from 2012-2017, while the market boomed +126.3, Zacks' Top 10s reached an even more sensational +181.9%.
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Facebook, Inc. (FB): Free Stock Analysis Report
Original post
Zacks Investment Research