Fed's decision to leave interest rates unchanged fueled fears about global economic growth
U.S. stocks sank on Friday, 18 September 2015 with the S&P 500 and the Dow Jones Industrial Average closing down for the week, as Federal Reserve's decision to leave interest rates unchanged fueled fears about global economic growth. The central bank cited concerns about the global economy and a lack of inflation growth in its Thursday decision to leave interest rates unchanged.
The Dow Jones Industrial Average dropped 289.95 points, or 1.7%, to close at 16,384.79 with all 30 components in the red. The blue-chip index edged down 0.3% for the week. The Nasdaq Composite shed 66.72 points, or 1.4% to 4,827.23. The tech-heavy index is the only one of the three major stock barometers to finish out the week higher with gains of 0.1%. The S&P 500 skidded 32.16 points, or 1.6%, to close at 1,958.08 for a weekly loss of 0.2%.
All ten sectors ended in the red with cyclical groups leading the decline. The energy sector spent the day well behind its peers as crude oil surrendered its weekly gain. Elsewhere, heavily-weighted financials and industrials also underperformed throughout the day.
Equity indices spent the entire Friday session in the red after heavy selling in the futures market ensured a lower start. The overnight weakness in futures was accompanied by a retreat in Europe as investors shied away from risk assets amid the persistent uncertainty. FOMC decision to hold the policy line has re-invited the rate-hike uncertainty that had pressured equity markets going into the September meeting. The uncertainty remains in place because Fed Chair Yellen, in her press conference, maintained that FOMC members are still looking to raise rates before the year ends.
During the week, Fed Chair Janet Yellen said, during her press conference following the central bank's monetary policy meeting, that the majority of the committee still sees higher interest rates later in the year. According to the central bank's projections, the committee's average for the Federal-funds rate by the end of 2015 is at 0.40%. Yellen added that there was an argument to be made for raising rates in September; however, because of the global weakness and fragile financial market, the committee decided to err on the side of caution and leave rates unchanged.
Among stocks under focus, shares of Freeport-McMoRan skidded 9.7% after the company raised $1 billion through selling stocks and plans to raise another $1 billion. Adobe Systems shares rose 1.2% after the company reported sharply higher third-quarter profit and disclosed a leadership shake-up. Shares were higher even as the company missed expectations.
Economic data was limited to the Leading Indicators report, which increased 0.1% in August after an upward revision made the growth rate flat (from -0.2%) in July. The consensus expected the index to increase 0.2%.
Bullion prices ended substantially higher on Friday, 18 September 2015 at Comex. Gold futures on Friday logged their second-highest close for the month of September, as prices rallied on the back of the Federal Reserve's decision to keep interest rates at historically low levels.
Gold for December delivery jumped $20.80, or 1.9%, to settle at $1,137.80 an ounce on Comex. That was the highest settlement since 1 September 2015. December silver also gained 17.9 cents, or 1.2%, to $15.163 an ounce. For the week, gold saw a 3.1% gain, while silver was up about 4.5%.
Crude oil futures saw their largest daily drop in almost three weeks on Friday, 18 September 2015 as the U.S. Federal Reserve's decision to keep interest rates unchanged raised worries about the U.S. economyand energy demand. Prices failed to find much support even after data released Friday showed a third straight weekly decline in active U.S. oil-drilling rigs.
October West Texas Intermediate crude settled at $44.68 a barrel, down $2.22, or 4.7%, on the New York Mercantile Exchange. Prices, which suffered from their largest daily point and percentage loss since 1 September 2015 settled a nickel, or 0.1%, higher than the week-ago settlement of $44.63.
Friday's retreat in stocks was accompanied by a rally in the Treasury market. The 10-yr note climbed throughout the day, pressuring its yield nine basis points to a two-week low of 2.13%.
Trading volume was elevated, with 5.74 billion shares changing hands on the New York Stock Exchange
On Monday, the Existing Home Sales report for August will be released at 10:00 ET (consensus 5.50 million).
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