NEW YORK, May 2 — Wall Street stocks finished a choppy session mostly lower while the dollar retreated yesterday after the Federal Reserve’s latest decision to hold interest rates steady.
US equities had rallied following a comment from Fed Chair Jerome Powell dismissing further interest rate hikes as “unlikely”. But equities soon gave up those gains, leaving two of the three major indices in the red at the close.
The Fed, as expected, kept interest rates flat for the sixth straight meeting.
The central bank’s prior outlook had projected three interest rate cuts in 2024. But inflation has accelerated, throwing cold water on hopes of an early rate cut this year.
Heading into Wednesday’s policy announcement, analysts had pointed to a hawkish comment on the likelihood of a rate hike as a potential risk for stocks.
However, Powell told a press conference that the central bank’s next change would probably not be an interest rate increase.
He maintained that monetary policy needs more time to do its job, adding that the Fed will consider the totality of economic data when making decisions.
Art Hogan of B. Riley Financial said stocks often “whipsaw” right after Fed decisions.
“At the end of the day we’re back to where we were before the meeting... and that’s basically higher for longer” in terms of interest rates, Hogan said.
With most continental European stock markets shut for May Day, London was the only major European exchange open, and the benchmark FTSE 100 stocks index closed slightly lower, as it gave up early gains to follow Wall Street lower.
The dollar, which has gained in recent days, pulled back following Powell’s press conference.
“The Fed didn’t seem too perturbed by inflation that’s seemingly started to stall at elevated levels,” said a note from Forex.com strategist James Stanley.
The pullback in the US currency included a brief drop of three per cent against the yen to 153.04 yen amid speculation of intervention by Japanese authorities. However, the rally in the Japanese currency proved fleeting.
In commodities, oil prices slid more than three per cent after US petroleum data pointed to week demand.
Among individual companies, Starbucks plunged 15.9 per cent as it reported a drop in profits, pointing to weakening consumer sentiment and lacklustre conditions in China as factors behind an earnings miss.
Johnson & Johnson gained 4.6 per cent after announcing a plan to pay US$6.5 billion to settle claims related to ovarian cancer due to the company’s talc products. If 75 per cent of claimants favour the plan, J&J can file a “prepackaged” Chapter 11 bankruptcy.
Drugmaker GlaxoSmithKline closed up 1.6 per cent after it announced progress in final trials of promising new drugs, even as profit fell 23 per cent in the first quarter. — AFP
