All eleven sectors end in the red led by energy and financial sectors
U.S. stocks extended losses on Wednesday, 02 November 2016 after the Federal Reserve kept interest rates unchanged as widely expected. The broader market began the day on a lower note as a downturn in crude oil and a negative bias in global bourses kept risk appetite in check. Participants also opted to move to the sidelines as the US presidential race tightened, according to recent polls.
The Dow Jones Industrial Average shed 67 points, or 0.3%, to 17,977. The Nasdaq Composite Index dropped 42 points, or 0.8%, to 5,112. The S&P 500 fell 12 points, or 0.6%, to 2,098.
All eleven sectors finished in the red with energy and financials representing notable laggards.
Stocks had been under pressure ahead of the Fed's decision as investors turned jittery over latest polls that showed Donald Trump narrowing his gap with Hillary Clinton with the election less than a week away.
The major averages saw some movement after the latest policy statement from the FOMC, but the S&P 500 ended near levels seen right before the release of the statement. The FOMC opted to leave the target range for the fed funds rate unchanged at 0.25% to 0.50% while stating that the case for moving rates higher had strengthened. Interestingly enough, only two FOMC members dissented at this meeting as Boston Fed President Eric Rosengren rejoined the majority.
Today's economic data included the weekly MBA Mortgage Index and the ADP Employment Report for October. The MBA Mortgage Index indicated that mortgage applications fell 1.2% in the week ending October 29. This followed a 4.1% decline in the prior week. The ADP Employment Change report for October showed an estimated 147,000 positions were added to private sector payrolls in October versus the consensus estimate of 165,000.
Safe haven bonds, gold, and currencies gained on the developments as participants attempted to mitigate the impact of any surprise results from next Tuesday's election. The Treasury complex gained across the curve, exerting continued pressure on yields from multi-month highs. The yield on the benchmark 10-yr note declined three basis points to 1.80% while the yield on the 2-yr note slipped two basis points.
Crude oil also extended early losses after the EIA confirmed a larger-than-expected build in crude oil inventories. The Department of Energy reported that crude oil inventories rose by 14.42 million barrels (consensus: +1.01 million) while gasoline stockpiles fell by 2.20 million barrels (consensus: -1.89 million). The energy component settled lower by 2.9% at $45.31/bbl.
In the financial sector, banking names underperformed as falling interest rates and declining oil prices weighed. Wells Fargo finished lower by 0.9%. The in-line policy statement from the Fed failed to upset the rate hike picture for the remainder of the year.
The heavily-weighted technology sector paced the retreat in the broader market as Facebook and Alphabet fell 1.8% and 1.9% respectively.
Today's trading volume was above the average of 865 million as more than 970 million shares changed hands at the NYSE floor.
Tomorrow's economic data will include the 7:30 ET release of October Challenger Job Cuts. Meanwhile, weekly initial claims (consensus 256k) and the preliminary estimate of third quarter Productivity (consensus 1.8%) and Unit Labor Costs (consensus 1.2%) will cross the wires at 8:30 ET. The day's data will be capped off with Factory Orders for September (consensus +0.2%) and ISM Services for October (consensus 55.8), which will be released at 10:00 ET.
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