Stocks Close Mixed Following Post-Fed Volatility - U.S. Commentary

(RTTNews) - As is often the case, stocks saw considerable volatility on Wednesday following the release of the Federal Reserve's monetary policy announcement. The major averages showed big swings back and forth before ending the session mixed.

While the tech-heavy Nasdaq managed to end the day in positive territory, the Dow and the S&P 500 closed in the red.

The Nasdaq rose 9.90 points or 0.3 percent to 3,626.37, while the Dow dipped 21.05 points 0.1 percent to 15,499.54 and the S&P 500 edged down 0.23 points or less than a tenth of a percent to 1,685.73.

The substantial volatility seen late in the trading day came following the Federal Reserve's highly anticipated post-meeting statement.

As was widely expected, the Fed announced that it is leaving interest rates as well as the size of its asset purchase program unchanged.

In what was seen as a dovish twist regarding the Fed's assessment of the economy, the statement said activity expanded at "modest pace" in the first half of the year. At its June meeting, the Fed said activity had been expanding at a "moderate pace."

The Fed also noted that inflation persistently below its 2 percent objective could pose risks to economic performance, although it noted that inflation is expected to move higher over the medium term.

However, the central bank did not specifically mention the outlook for its asset purchase program, which many economists expect to be scaled back at the next meeting in September.

Chris Low, chief economist at FTN Financial, said, "The Fed's description of the economic environment changed in a way suggesting they are a little less impressed with the recent performance of the economy."

"Nevertheless, the Fed remains confident the economy will soon reaccelerate, suggesting their plans to reduce the size of asset purchases will go forward on whatever schedule they are currently contemplating," he added. "We expect the first reduction in purchases in September."

Earlier in the day, some positive sentiment was generated by the release of a pair of better than expected reports on private sector employment and second quarter GDP.

Sector News

While most of the major sectors ended the day showing only modest moves, considerable strength remained visible among housing stocks.

The Philadelphia Housing Sector Index advanced by 1.1 percent but ended the session well off its best levels of the day.

Meanwhile, commercial real estate stocks came under significant selling pressure, dragging the Morgan Stanley REIT Index down by 1.6 percent.

Moderate strength among trucking and oil stocks was offset by weakness in the tobacco, utilities, and computer hardware stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday. Japan's Nikkei 225 Index tumbled by 1.5 percent, while Hong Kong's Hang Seng Index ended the day down by 0.3 percent.

Meanwhile, the major European markets moved to the upside on the day. While the U.K.'s FTSE 100 Index advanced by 0.8 percent, the French CAC 40 Index and the German DAX Index edged up by 0.2 percent and 0.1 percent, respectively.

In the bond market, treasuries recovered from early weakness on the heels of the Fed statement to close modestly higher. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, edged down by 1 basis point to 2.593 percent after reaching a high of 2.702 percent.

Looking Ahead

While trading on Thursday may continue to be impacted by reaction to the Fed statement, traders will also be presented with reports on weekly jobless claims, manufacturing activity, and construction spending.

On the earnings front, Exxon Mobil (XOM), Procter & Gamble (PG), and Kellogg (K) are among the companies due to report their quarterly results before the start of trading on Thursday.