Stocks closed lower for the fifth straight day with a big sell-off in the final 30 minutes of trading.
The selling resulted from a Federal Reserve statement indicating a high level of uncertainty regarding U.S. economic growth and future interest rate hikes. When pressed, Fed Chair Janet Yellen cited the May jobs report as evidence of a sluggish economy. And Fed Governor Lael Brainard was quoted as saying “tentative signs of slowing in the labor market” and global risks mean “we cannot take the resilience of our recovery for granted.” So, it is obvious that any rate increases will depend on future jobs reports.
Bank stocks fell in response to the Fed’s decision. And the yield on the 10-year Treasury note fell to 1.60% from 1.62% on Tuesday, the lowest yield since December 2012.
A rate hike in July is probably off the table as well, with Fed Fund futures putting the chances at just 7%, according to the CME Group.
Gold closed up 0.5% at $1,294.80 an ounce, but hit $1,300 following the Fed decision. Gold stocks were among the day’s best performers. (See the Trade of the Day.)
WTI crude oil closed down 1% at $48.01 a barrel on oversupply concerns. A report showed stockpiles decreased by only 933,000 barrels last week, less than half of analysts’ estimates.
The dollar fell 0.6% against a basket of currencies, and the euro rose to $1.1261 from $1.1206 on Tuesday.
At Wednesday’s close, the Dow Jones Industrial Average fell 35 points to 17,640, the S&P 500 lost 4 points at 2,072, the Nasdaq was down 9 points at 4,835, and the Russell 2000 rose a point to 1,149.
The NYSE Composite’s primary exchange traded 903 million shares with total volume of 3.5 billion. The Nasdaq crossed 1.8 billion shares. On the Big Board, advancers outpaced decliners by 1.6-to-1, and on the Nasdaq, advancers led by 1.2-to-1. Block trades on the NYSE were about even with Tuesday.
So, what’s all the fuss about when the Dow Jones Industrial Average closed down only 35 points? The 100 point sell-off that occurred in the final 30 minutes of trading.
And a last-minute block of purchases added 11 points. That block may be related to this Friday’s options expiration.
Before the late sell-off, the Nasdaq was holding at its 50-day moving average, but like the Dow, it took a nasty hit in the last half hour, falling 35 points. It closed just under the 50-day at 4,856 and just above the 200-day at 4,816. Selling volume has increased in the past three days, and MACD flashed a sell signal on Monday.
Conclusion
Yellen’s “explanation” of the Fed’s non-action wasn’t well received by the Street. The word “uncertain,” which every investor abhors, was repeated several times. Corporate planners hate the word, as well. They can deal will bad news, but how does one plan for uncertainty?
With gold and other precious metals and U.S. government bonds in demand, buyers appear to be shifting from “risk on” to “risk off.”
Today’s Trading Landscape
To see a list of the companies reporting earnings today, click here.
For a list of this week’s economic reports due out, click here.
