NEW YORK: Early gains for U.S. stocks faded in the final half-hour of trading Wednesday, leading major indexes to their fifth consecutive session of losses.
Stocks held on to gains when the Federal Reserve on Wednesday afternoon kept its benchmark lending rate steady and policy makers forecast fewer short-term interest-rate increases in 2017 and 2018.
Following the Fed’s statement, some traders turned their attention to another central bank: The Bank of Japan meets this week, and investors are waiting to see whether it steps up stimulus measures.
The Dow Jones Industrial Average ended the day down 34.65 points, or 0.2%, at 17640.17. Earlier, the blue-chip index rose as much as 88 points.
The S&P 500 slipped 3.82 points, or 0.2%, to 2071.50, while the Nasdaq Composite fell 8.62 points, or 0.2%, to 4834.93.
The Fed’s widely expected decision to keep its short-term interest rate steady suggested the gains notched by stocks that pay out high dividends are likely to continue, while shares of financial institutions that could benefit from higher interest rates are likely to remain under pressure.
That investing trend has been heightened in the past couple of weeks following the worst U.S. jobs report in six years, which Fed Chairwoman Janet Yellen dubbed “concerning.” Indeed, since then, bank shares have plummeted and the yield on the 10-year U.S. Treasury note has plumbed new lows.
The yield on the 10-year Treasury note sank to 1.594% Wednesday, from 1.611% Tuesday, settling at its lowest yield since December 2012.
Shares of utilities companies, which are the best performers in the S&P 500 in 2016, slipped 0.7%. Over the past week, the sector is one of only two positive ones in the index, with a 0.3% rise.
“Any damage [these stocks] might suffer from rising rates is a bit further off,” said Brad McMillan, chief investment officer for Commonwealth Financial Network, adding he now believes a rate rise in July is off the table. “There’s no longer any suggestion of imminent rate increases.”
Shares of utility Consolidated Edison fell 94 cents, or 1.2%, to $77.31 Wednesday, but for the year so far remain up 20%.
In the past week, the KBW Nasdaq Bank Index has fallen 6%, even as it rebounded 0.2% on Wednesday.
Fed officials still project short-term interest rates will rise 0.5 percentage point by the end of 2016, yet forecasts imply Fed officials see their benchmark federal-funds rate rising more slowly in the years ahead. Market participants now see a 7% chance of a rate rise in July and a 29% chance of higher rates by September, according to fed-funds futures tracked by CME Group. Before the Fed’s statement, the probability for a rate increase by July was seen at 21% and a rise by September was at 35%.
Ahead of the Fed’s statement Wednesday, recent economic data painted a mixed picture of the world’s largest economy. The May jobs report showed hiring fell sharply, and broader economic growth slowed to 0.8% annualized in the first quarter. Still, new jobless claims have come in at historic lows, while U.S. retail sales rose solidly in May, pointing to healthy consumer spending. Prices for imported goods rose the most since 2012, suggesting inflation also could be moving toward the Fed’s 2% target.
A report released Wednesday said U.S. industrial output fell in May as manufacturing production fell, highlighting how U.S. manufacturing still hasn’t turned a corner.
“The Fed is waiting for perfect, and it’s very unlikely they’re ever going to get perfect, which just means they’ll be really slow to move,” said Jim Tierney, chief investment officer of concentrated U.S. growth at AllianceBernstein Holding LP.
Stocks around the globe rebounded Wednesday. The Stoxx Europe 600 rose 1%, ending a five-session losing streak.
Shares in Shanghai rose 1.6% even after a widely tracked emerging-market index decided not to include a group of mainland Chinese stocks for a third time, delivering a blow to China’s efforts to join international markets.
China’s inclusion in the MSCI Emerging Markets Index would have marked “the single biggest development in emerging markets in 20 years,” according to Peter Marber, head of emerging-markets investments at Loomis, Sayles & Co.
Traders said the market’s resilience Wednesday suggested mainland investors had held lower expectations for an inclusion going into the day, compared with international investors.