Stocks drop after Fed decision
Disheartened investors bid stocks lower Tuesday after the Federal Reserve, raising interest rates for the 14th time in nearly two years, failed to give Wall Street a clear signal on when those rate hikes would end. A disappointing earnings report from Google Inc. after the close of regular trading made it likely the losses would continue when trading resumed Wednesday.
The Fed, in its statement accompanying its quarter-point increase in rates, said “some further policy firming may be needed” to keep inflation under control — leaving the door open for another hike at the next meeting in March and beyond.
“The knee-jerk reaction was things aren’t as sure as everybody thought, but when I look at this, this is right in the middle of what my expectations were,” said Chris Johnson, manager of quantitative analysis at Schaeffer’s Investment Research in Cincinnati. “They left a rate hike in the deck here in case they need it, but that doesn’t mean more of the same.”
The Dow Jones Industrials fell 35.06, or 0.32 percent, to 10,864.86.
Broader stock indicators were modestly lower. The Standard & Poor’s 500 index lost 5.12, or 0.4 percent, to 1,280.08, and the Nasdaq composite index slipped 0.96, or 0.04 percent, to 2,305.82.
Bonds edged higher on the Fed news, with the yield on the 10-year Treasury note fell to 4.52 percent from 4.53 percent late Monday. The dollar fell against most major currencies, while gold prices rose.
Crude oil futures fell after the Organization of Petroleum Exporting Countries, meeting in Vienna, decided not to cut oil production. A barrel of light crude settled at $67.92, down 43 cents, on the New York Mercantile Exchange.
Despite continued economic uncertainty, strong corporate earnings helped the major indexes post respectable gains for the month of January. The Dow rose 1.37 percent, the S&P climbed 2.55 percent and the Nasdaq gained 4.56 percent for the month.
In other economic news, the Conference Board’s consumer confidence index for January came in at a higher-than-expected 106.3, up from 103.8 in December and better than the 105 reading predicted on Wall Street. While the index rose to its highest level in three years, the news was largely overlooked by investors preoccupied with the Fed.
Advancing issues barely outnumbered decliners on the New York Stock Exchange, where volume preliminary consoldiated volume came to 2.76 billion shares, compared with 2.34 billion traded on Monday.
The Russell 2000 index of smaller companies rose 2.33, or 0.32 percent, to 733.20.
Overseas, Japan’s Nikkei stock average rose 0.6 percent. In Europe, Britain’s FTSE 100 was down 0.34 percent, France’s CAC-40 gained 0.23 percent for the session, and Germany’s DAX index climbed 0.25 percent.