Wall Street rally disintegrates shortly before the close

By Noel Randewich (Reuters) - A Wall Street rally collapsed and stocks turned negative shortly before the market close on Wednesday after investors reassessed the Federal Reserve's policy statement and reduced their risk as they weighed how long the U.S. central bank would continue to raise interest rates. U.S.

Reuters September 27, 2018 03:05:07 IST
Wall Street rally disintegrates shortly before the close

Wall Street rally disintegrates shortly before the close

By Noel Randewich

(Reuters) - A Wall Street rally collapsed and stocks turned negative shortly before the market close on Wednesday after investors reassessed the Federal Reserve's policy statement and reduced their risk as they weighed how long the U.S. central bank would continue to raise interest rates.

U.S. stocks initially extended gains after the Fed, as expected, raised interest rates and left its monetary policy outlook for the coming years largely unchanged amid steady economic growth and a strong job market.

But the market reversed course as investors weighed to what degree the elimination of the word "accommodative" from the Fed's policy statement suggested that the end of a cycle of interest-rate hikes might be in sight.

The Fed lifted its benchmark overnight lending rate by a quarter of a percentage point to a range of 2.00 percent to 2.25 percent.

"People misinterpreted the removal of 'accommodative' in the statement," said Mike O'Rourke, chief market strategist at JonesTrading. "People realized that monetary policy remains on course and there are expectations of another rate hike this year, and they unwound purchases they made on the release of the statement, and also additional de-risking going into the close."

The S&P 500 financial index <.SPSY> fell 1.27 percent, leading declines.

The S&P 500 utilities index <.SPLRCU> and real estate index <.SPLRCR>, which are sensitive to interest rates because their components are often favoured for their dividend yields, each fell over 1 percent.

The Fed still foresees another rate hike in December, three more next year, and one increase in 2020.

Fed Chairman Jerome Powell said after the policy meeting that the U.S. central bank is closely monitoring inflation, underscoring concerns the U.S. economy's rapid growth could lead to overheating and force the Fed to raise rates further.

Referring to the removal of the word "accommodtive," Powell said, "This change does not signal any change in the likely path of policy. Instead, it is a sign that policy is proceeding in line with our expectations.”

The stock market has enjoyed a boom period and is at record levels. But as rates rise, equities face rising competition for investors' funds not only from bonds, but also from cash, which is now the most attractive it has been in about a decade.

The Dow Jones Industrial Average <.DJI> ended down 0.4 percent at 26,385.28 points, while the S&P 500 <.SPX> lost 0.33 percent to 2,905.97. During the session, the S&P 500 traded up as much as 0.53 percent.

The Nasdaq Composite <.IXIC> dropped 0.21 percent to 7,990.37.

The S&P 500 health index <.SPXHC> rose 0.20 percent, led by biotechs, while the newly formed communication services index <.SPLRCL> rose 0.35 percent, boosted by Facebook , which gained 1.24 percent.

Twenty-First Century Fox rose 1.02 percent after agreeing to sell its stake in Sky to Comcast , which dipped 0.08 percent. Walt Disney Co , which is buying Fox, jumped 1.39 percent.

Nike fell 1.3 percent as the sportswear maker stuck to its full-year forecast even after sales got a boost from a controversial ad campaign featuring former NFL player Colin Kaepernick.

Declining issues outnumbered advancing ones on the NYSE by a 1.60-to-1 ratio; on Nasdaq, a 1.70-to-1 ratio favoured decliners.

The S&P 500 posted 31 new 52-week highs and 12 new lows; the Nasdaq Composite recorded 66 new highs and 73 new lows.

Volume on U.S. exchanges was 7.0 billion shares, compared to a 6.7 billion average over the last 20 trading days.

(Reporting by Noel Randewitch; Additional reporting by Amy Caren Daniel in Bengaluru and Caroline Valetkevitch in New York; Editing by Leslie Adler)

This story has not been edited by Firstpost staff and is generated by auto-feed.

Updated Date:

TAGS:

also read

France, Germany to agree to NATO role against Islamic State - sources
| Reuters
World

France, Germany to agree to NATO role against Islamic State - sources | Reuters

By Robin Emmott and John Irish | BRUSSELS/PARIS BRUSSELS/PARIS France and Germany will agree to a U.S. plan for NATO to take a bigger role in the fight against Islamic militants at a meeting with President Donald Trump on Thursday, but insist the move is purely symbolic, four senior European diplomats said.The decision to allow the North Atlantic Treaty Organization to join the coalition against Islamic State in Syria and Iraq follows weeks of pressure on the two allies, who are wary of NATO confronting Russia in Syria and of alienating Arab countries who see NATO as pushing a pro-Western agenda."NATO as an institution will join the coalition," said one senior diplomat involved in the discussions. "The question is whether this just a symbolic gesture to the United States

China's Xi says navy should become world class
| Reuters
World

China's Xi says navy should become world class | Reuters

BEIJING Chinese President Xi Jinping on Wednesday called for greater efforts to make the country's navy a world class one, strong in operations on, below and above the surface, as it steps up its ability to project power far from its shores.China's navy has taken an increasingly prominent role in recent months, with a rising star admiral taking command, its first aircraft carrier sailing around self-ruled Taiwan and a new aircraft carrier launched last month.With President Donald Trump promising a US shipbuilding spree and unnerving Beijing with his unpredictable approach on hot button issues including Taiwan and the South and East China Seas, China is pushing to narrow the gap with the U.S. Navy.Inspecting navy headquarters, Xi said the navy should "aim for the top ranks in the world", the Defence Ministry said in a statement about his visit."Building a strong and modern navy is an important mark of a top ranking global military," the ministry paraphrased Xi as saying.