Fed inaction leads to uncertainty among investors
U.S. stocks relinquished modest gains and closed lower on Wednesday, 15 June 2016 stretching a losing streak to five days, as investors weighed the Federal Reserve's decision to delay rate increases. The Fed acknowledged that hiring slowed and that business fixed investment was soft and signaled a slower approach on raising borrowing costs.
The Dow Jones Industrial Average ended 34.65 points, or 0.2%, lower at 17,640.17. The Nasdaq Composite Index fell 8.62 points, or 0.2% to 4,834.93. The S&P 500 which at the session high was up 10 points, ended with a loss of 3.82 points, a decline of 0.2%, at 2,071.50.
Materials and consumer-discretionary stocks ended modestly higher, while defensive stocks lagged behind. The utilities and health care sectors ended lower. Intel and Cisco Systems led the losses.
Federal Reserve officials kept interest rates steady and adopted a dovish tone in its updated monetary policy statement.
Meanwhile, fears about the outcome of next week's so-called Brexit votea referendum that could determine if the U.K. exits the European Unionhave supported demand for haven assets like precious metals. The vote is scheduled for 23 June.
Among expected economic data, the weekly MBA Mortgage Index showed a seasonally adjusted decrease of 2.4% in mortgage applications. The Producer Price Index for final demand increased 0.4% in May while the index for final demand, less food and energy, increased 0.3%. This report, if nothing else, demonstrates how the rebound in energy prices holds the potential to invite higher inflation readings in coming months due to easier price comparisons.
Separately, the Empire Manufacturing Survey for June, popped 15 points to 6.0 driven by a healthy rebound in the index for new orders (from -5.5 to 10.9). A number above zero connotes expansion in regional manufacturing activity.
Crude oil futures settled lower on Wednesday, 15 June 2016 pressured by concerns over global energy demand following disappointing U.S. economic data and ahead of the U.K. referendum scheduled for next week. A modest weekly decline in U.S. crude supplies and the Federal Reserve's decision to stand pat on interest rates failed to offer much support for prices.
July West Texas Intermediate crude fell 48 cents, or 1%, to settle at $48.01 a barrel on the New York Mercantile Exchange, marking a fifth session decline in a row. The August contract for Brent lost 86 cents, or 1.7%, at $48.97 a barrel.
Prices pared losses and saw a brief tick higher after the U.S. Energy Information Administration reported that U.S. crude supplies fell by 900,000 barrels for the week ended 10 June. Gasoline supplies declined by 2.6 million barrels, while distillate stockpiles edged up by 800,000 barrels last week, according to the EIA.
Gold futures extended their streak of gains to a sixth straight session on Wednesday, 15 June 2016 at Comex and prices continued to climb in electronic trading after the U.S. Federal Reserve stood pat on interest rates. Delays in hiking benchmark interest rates have been bullish for gold prices, while a potential increase would boost the appeal of the U.S. dollar and make dollar-pegged assets more expensive to buyers using other currencies.
August gold rose 20 cents to settle at $1,288.30 an ounce before the Fed decision. It moved up to $1,293.10 in electronic trading shortly after the news. Prices trade about 6% higher month to date. July silver rose 7.9 cents, or 0.5%, to $17.503 an ounce.
The U.S. Dollar Index climbed off its low as the greenback trimmed its losses against the euro and pound.
The Treasury complex ended the day higher as the yield on the 10-yr note slipped three basis points to 1.58%.
Today's participation came in above the recent average as more than 877 million shares changed hands on the NYSE floor.
Tomorrow's economic data will include Core CPI for May, weekly initial claims, the Philadelphia Fed Survey for June, and the first quarter Current Account Balance each crossing the wires at 8:30 ET. Separately, the June NAHB Housing Market Index will be released at 10:00 ET.
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