LONDON: U.S. stocks ended Wednesday’s session slightly lower, taking a pause after two straight days of gains.
The main indexes retreated as Federal Reserve Chairwoman Janet Yellen hinted that a 25 basis point rate hike in December would not derail the economy or the housing market. New York Fed President William Dudley also struck a hawkish tone, saying he agreed with Fed Chairwoman that a December rate hike is a live possibility.
Some analysts said the moderate pullback on Wednesday was a function of October’s outsize gains — the biggest monthly climb since 2011.
The S&P 500 SPX, -0.35% fell 7.46 points, or 0.4%, to 2,102.33, with eight of its 10 main sectors closing lower. Energy and consumer discretionary sector stocks were the biggest decliners, while utilities and tech stocks rose modestly.
The Dow Jones Industrial Average DJIA, -0.28% fell 50.57 points, or 0.3%, to 17,867.58. The Nasdaq Composite COMP, -0.05% ended the day down 2.65 points, or less than 0.1%, at 5,142.48.
Yellen’s hawkish comments affected traders’ rate-hike expectations, with the odds of a rate hike in December moving to 60% from about 52% on Tuesday, according to the CME Group Fed Watch tool. The yield on the 2-year Treasury note, which is the most sensitive to the prospect of a rate hike, spiked to 0.8%, its highest level in four years.
“Janet Yellen has been signaling a rate hike for a year and markets have already priced in the possibility. Let’s not forget that markets actually rallied after the last Fed meeting when the statement suggested rates would rise in December,” said Bruce Bittles, chief investment strategist at RW Baird & Co.
“We live in a two-tiered economy where manufacturing is slumping but the services sector, which is a much bigger part of the economy is doing well. The slow-growing economy is still the best option for the stock market,” Bittles said.
