Wall Street edges lower after Fed raises rates

By Lewis Krauskopf

NEW YORK (Reuters) - U.S. stocks edged lower on Wednesday after the Federal Reserve raised interest rates for the second time in three months and weaker oil prices weighed on the energy sector.

The U.S. central bank cited continued U.S. economic growth and job market strength, proceeding with its first tightening cycle in more than a decade. The Fed also said it will begin cutting holdings of bonds and other securities this year.

"I don't think that there is really too much new in here outside of the fact that the Fed remains committed to the slow gradual normalization process despite some of the weak data that we've had," said Mark Cabana, head of U.S. short rates strategy at Bank of America Merrill Lynch in New York.

 

U.S. consumer prices unexpectedly fell in May and retail sales recorded their biggest drop in 16 months, data showed on Wednesday.

The Dow Jones Industrial Average <.DJI> fell 9.45 points, or 0.04 percent, to 21,319.02, the S&P 500 <.SPX> lost 9.19 points, or 0.38 percent, to 2,431.16 and the Nasdaq Composite <.IXIC> dropped 55.77 points, or 0.9 percent, to 6,164.60. The Fed clearly outlined a plan to reduce its $4.2 trillion portfolio of Treasury bonds and mortgage-backed securities, most of which were purchased in the wake of the 2007-2009 financial crisis and recession.

"The market should take confidence in the fact that they're being very transparent in setting clear policy steps in terms of how they normalise the balance sheet," said Heidi Learner, chief economist for Savills Studley, a unit of Savills Plc, in New York. "Certainly more transparency is a good thing."

The energy sector <.SPNY> was down nearly 2 percent as oil prices weakened. U.S. data showed an unexpectedly large weekly build in U.S. gasoline inventories and International Energy Agency (IEA) data projected a big increase in non-OPEC output in 2018.

The technology sector <.SPLRCT> fell 1.2 percent, with Apple off 1.6 percent. Tech stocks have led the S&P 500's nearly 9 percent rally this year, but have faltered in recent days.

In corporate news, Alexion was up 8 percent after the biotechnology company named Biogen's chief financial officer as its CFO. Biogen's stock was down 3.5 percent.

H & R Block was the biggest percentage gainer on the S&P 500, rising 8.4 percent after the tax preparation service posted quarterly revenue and profit that beat analysts' expectations.

Declining issues outnumbered advancing ones on the New York Stock Exchange by a 1.35-to-1 ratio, while on Nasdaq, a 1.72-to-1 ratio favored decliners.

(Additional reporting by Sam Forgione and Herb Lash in New York and Yashaswini Swamynathan in Bengaluru; Editing by Nick Zieminski and Jeffrey Benkoe)