Stocks mixed after interest rate hike
Stocks stumbled to a mixed finish Tuesday as the Federal Reserve kept to its policy of gradual interest rate hikes, but provided little new insight into the health of the economy.
The Fed’s Open Market Committee announced a widely expected quarter percentage point hike in the nation’s benchmark lending rate, to 3 percent, and said future rate hikes would remain “measured,” a phrase designed to ease investors’ fears of more aggressive increases.
Most of the statement that accompanied the latest rate move was unchanged from the Fed’s March 22 meeting, stating that long-term inflationary pressures “remained well contained.” The central bank acknowledged that higher energy prices are starting to slow spending growth, but that wasn’t enough for the Fed to abandon its approach to rate hikes.
“It’s pretty much the same as last time, and it shows the Fed’s not overly pessimistic about the economy,” said Jack Ablin, chief investment officer with Harris Private Bank in Chicago. “The fact that they’re not changing their underlying longer-term strategy here adds a certain degree of comfort for investors.”
The Dow Jones industrial average rose 5.25, or 0.05 percent, to 10,256.95. The Dow was down 46 points five minutes before the close, but surged into positive territory after the Fed amended its policy statement to add the wording about inflation being contained, which had been inadvertently omitted.
Broader stock indicators finished narrowly mixed. The Standard & Poor’s 500 index was down 0.99, or 0.1 percent, at 1,161.17. The Nasdaq composite index gained 4.42, or 0.23 percent, at 1,933.07.
Falling crude prices gave a little support to stocks, with a barrel of light crude settling at $49.50, down $1.42, on the New York Mercantile Exchange. The bond market slipped lower, with the yield on the 10-year Treasury rising to 4.20 percent from 4.19 percent late Monday. The dollar was mixed against other currencies in European trading, and gold fell.
Wall Street again received mixed messages on the economy, with American factories showing a tiny 0.1 percent increase in orders last month, better than the large drop economists had forecast. However, the vast majority of orders were for consumable goods, while orders for big-ticket, durable items fell sharply — a sign that consumers aren’t making the big purchases that fuel economic growth.
Declining issues outnumbered advancers by about 8 to 7 on the New York Stock Exchange, where preliminary consolidated volume came to 2.16 billion shares, compared with 2 billion on Monday.
The Russell 2000 index of smaller companies was down 1.38, or 0.24 percent, at 584.48.
Overseas, Japanese financial markets were closed Tuesday for Constitution Day, a national holiday. Trading will resume on Friday after the annual “golden week” holidays. In Europe, Britain’s FTSE 100 closed up 1.24 percent, France’s CAC-40 rose 0.4 percent for the session, and Germany’s DAX index gained 0.51 percent.