LONDON: U.S. stocks tumbled broadly at end on Wednesday as a renewed fall in oil value weighed down the energy sector.
A statement from the Federal Reserve that it would remain “patient” when it comes to any interest-rate increases failed to give stocks a lift, traders said. Investors had expected the Fed to refrain from making any policy changes at the two-day meeting which ended Wednesday.
The Dow Jones Industrial Average dropped 195.84 points, or 1.1%, to 17191.37. The S&P 500 fell 27.39 points, or 1.4%, to 2002.16, and the Nasdaq Composite Index lost 43.50 points, or 0.9%, to 4637.99.
Energy shares in the S&P 500 tumbled 3.9%, as crude-oil futures resumed their monthslong decline, falling 3.9% to $ 44.45 a barrel. Fourth-quarter profits of energy companies are expected to shrink by 25% from the previous year, according to FactSet, as the oil-price dive weighs on their bottom lines.
The Fed statement said U.S. economic growth remains “solid,” and that the central bank would watch financial and international developments before raising rates. Investors have been parsing recent statements from Fed officials for clues about when they could raise interest rates, a move widely expected this year. Analysts say that low interest rates in the U.S. have helped support stock-market gains, since stocks look attractive compared with low-yielding government bonds, and low borrowing costs give a boost to corporate profits.
“They delivered what the market expected,” said Chris Gaffney, senior market strategist at EverBank Wealth Management. He said the Fed remains on track to raise rates midyear, which could mean more bumpy trading in the U.S. stock market.
U.S. Treasury bonds rallied after the Fed statement, pushing the yield on the 10-year note down to 1.723%, its lowest level in more than a year.
Because of the recent strength in the dollar, EverBank’s Mr. Gaffney thinks that U.S. large-cap stocks could lag behind small-cap shares, which have lower exposure to international markets and currency fluctuations. The U.S. dollar rally has been driven, in part, by diverging monetary policies from global central banks: As the Fed prepares to raise rates, European and Asian central banks have introduced stimulus efforts.
