U.S. stocks relinquished modest gains to close lower Wednesday, as the Federal Reserve acknowledged rising prices and said it now expects inflation to “run near” its 2% target “over the medium term,” in its most recent policy statement. The central bank held key rates unchanged, as expected.
What are the main benchmarks doing?
The Dow Jones Industrial Average DJIA, -0.72% closed 174.07 points, or 0.7%, lower at 23,924.98, with 24 of its 30 components finishing in negative territory.
The S&P 500 index SPX, -0.72% fell 19.13 points, or 0.7%, to 2,635.67, with 10 of the 11 main sectors closing with losses. Consumer-staples stocks led the declines, down 2% on the day, while energy was the only bright spot on Wall Street, up about 0.4% as crude-oil prices climbed.
Meanwhile, the technology-heavy Nasdaq Composite Index COMP, -0.42% declined 29.81 points, or 0.4%, to 7,100.90.
What’s driving markets?
Fed officials wrapped up a two-day meeting, saying they expect further interest rate hikes will be needed in coming months. However, there was little in the statement that gave traders clarity over how many rate hikes are in the cards. The market is pricing in a high probability that the next interest-rate increase will come next month.
In total, fed-funds futures, used by investors to wager on short-term rates, indicate that Wall Street is pricing in roughly even odds at the chance of three more rates hikes in 2018.
Which economic data are in focus?
In the latest economic data, the private sector added 204,000 jobs in April, according to ADP. While this was above forecasts, it was also down from the 241,000 added in the previous month.
What are market analysts saying?
“There are concerns in the market that rising inflation will prompt the Fed to hike more than three times this year, but the Fed statement was reassuring as it did not hint of faster pace of hikes,” said Kate Warne, investment strategist at Edward Jones.
“While this should be positive for markets in general, we should be careful to assigns today’s modest moves to the Fed statement. Small moves often happen even without any news,” Warne said.
Which stocks are moving?
In corporate news, Apple’s stock AAPL, +4.42% gained 4.4%, after the company late Tuesday posted better-than-anticipated earnings and revenue for the first quarter.
The iPhone maker was merely the latest high-profile company to top analyst forecasts in its results. However, even better-than-expected earnings haven’t been enough to lift the main equity benchmarks out of a tight range in recent weeks, as investors are also worried about protectionism and other geopolitical flare-ups.
Snap Inc. SNAP, -21.94% plummeted about 22%, a day after reporting revenue and active daily users that were below forecasts.
Yum Brands Inc. YUM, -7.43% reported first-quarter earnings and sales that beat expectations. The fast-food chain operator also affirmed its full-year guidance. Still, shares fell 7.4%.
CVS Health Corp. CVS, -3.03% fell 3% despite reporting adjusted first-quarter earnings that beat expectations, along with better-than-expected sales.
Southern Co. SO, +0.96% reported first-quarter revenue that beat expectations, and earnings that were helped by the recently passed tax bill. The stock rose 1%.
Wyndham Worldwide Corp. WYN, -5.58% reported a sharp drop in its first-quarter earnings, although sales rose modestly. Shares fell 5.6%.
SodaStream International Ltd. SODA, -8.16% reported first-quarter earnings that beat expectations. It also raised its outlook. However, the stock lost 8.2%.
Esperion Therapeutics Inc. ESPR, -35.11% announced results for a late-stage clinical trial of its cholesterol-lowering medication. The stock plunged by 35%.
What are other markets doing?
European stocks SXXP, +0.63% closed modestly higher, supported by upbeat corporate results.
Markets in Asia ended little changed. Stocks in Japan NIK, -0.16% dipped 0.2%. Investors were awaiting cues from U.S.-China trade negotiations.
Gold futures GCM8, +0.24% finished the session at a two-moth low but popped after the Fed statement, while U.S. oil futures settled higher. The ICE U.S. Dollar Index DXY, -0.09% bounced, trading up 0.4% at 92.802. The index has now gained 0.7% for 2018, having turned positive for the first time on Monday.
