Stocks Close Mostly Lower Following Uninspiring Fed Statement - U.S. Commentary

(RTTNews) - Following the lackluster performance seen in the previous session, stocks remained mostly negative throughout the trading day on Wednesday. The markets did not show much reaction to the Federal Reserve's monetary policy announcement.

The major averages finished the session firmly in the red but well off their worst levels of the day. The Dow fell 74.61 points or 0.4 percent to 18,035.53, the Nasdaq dropped 31.78 points or 0.6 percent to 5,023.64 and the S&P 500 slid 7.91 points or 0.4 percent to 2,106.85.

The lower close on Wall Street came following the Federal Reserve's announcement of its latest monetary policy decision.

The Fed left interest rates unchanged as was widely expected and acknowledged that economic growth slowed during the winter months.

However, the Fed said the slower economic growth partly reflected transitory factors, likely referring to the impact of the severe weather and a labor dispute at West Coast ports.

While the central bank did not provide any specific guidance about the outlook for interest rates, analysts noted that the statement did not rule out a rate hike in June.

The Fed's unwillingness to speculate about the outcome of the June meeting likely reflects uncertainty about whether the economy will rebound from the weak growth seen in the first quarter.

Rob Carnell, chief international economist at ING, said, "For the Fed to rule out a June hike now, though it looks unlikely at this stage, would have left them hostages to the run of data between now and then."

"Indeed, it is entirely possible that this data will run consistently stronger than it has been doing in recent weeks, though whether it will be strong enough for the Fed to actually hike in June still seems quite a push," he added.

Earlier in the day, the Commerce Department released a report showing that the U.S. economy grew by even less than anticipated in the first quarter of 2015.

The report said U.S. GDP inched up by just 0.2 percent in the first quarter following the 2.2 percent growth seen in the fourth quarter. Economists had expected an increase of about 1.0 percent.

Meanwhile, traders largely shrugged off a separate report from the National Association of Realtors showing that pending home sales rose to a nearly two-year high in March.

Sector News

After moving notably higher over the past few sessions, steel stocks showed a substantial move back to the downside. The NYSE Arca Steel Index plunged by 2.8 percent, pulling back off the four-month closing high set in the previous session.

Industry giant U.S. Steel (X) led the sector lower after reporting an unexpected first quarter loss and cutting its full-year profit forecast.

Significant weakness was also visible among airline stocks, as reflected by the 2.8 percent drop by the NYSE Arca Airline Index. Spirit Airlines (SAVE) turned in one of the sector's worst performances after forecasting a notable drop in unit revenue in the current quarter.

Commercial real estate, trucking, and retail stocks also came under pressure on the day, contributing to the weakness shown by the broader markets.

On the other hand, oil service stocks moved sharply higher, driving the Philadelphia Oil Service Index up by 2.5 percent. The strength in the sector came as crude for June delivery jumped $1.52 to a four-month closing high of $58.58 a barrel.

Gold and banking stocks also saw some strength on the day, partly offsetting the weakness seen in the aforementioned sectors.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower on Wednesday, although the Japanese market was closed for the day. Hong Kong's Hang Seng Index edged down by 0.2 percent, while Australia's All Ordinaries Index tumbled by 1.7 percent.

The major European markets also came under pressure on the day. While the U.K.'s FTSE 100 Index slumped by 1.2 percent, the French CAC 40 Index plunged by 2.6 percent and the German DAX Index plummeted by 3.2 percent.

In the bond market, treasuries moved notably lower for the second consecutive session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, climbed 6.2 basis points to a one-month closing high of 2.035 percent.

Looking Ahead

In light of the Fed's focus on incoming economic data, trading on Thursday may be impacted by reaction to reports on weekly jobless claims, personal income and spending, and Chicago-area business activity.

On the earnings front, oil giant Exxon Mobil (XOM) is among a slew of companies due to report their quarterly results before the start of trading on Thursday.