Stocks end mixed as Fed offers little hint of coming rate hike
Stocks ended mixed after the Federal Reserve left interest rates unchanged and gave few signs it is in a rush to hike borrowing costs amid a mixed economic picture, helping to offset earlier weakness sparked by a rare earnings miss from iPhone maker Apple.
The Fed, as expected, left short-term rates unchanged at a target of 0.4%, holding off on a rate hike for the third straight meeting in 2016. The closely read Fed statement flashed no clear-cut signs that a rate hike is coming anytime soon, and while it didn't specifically rule out a June hike, the language in the statement did little to change the perception that the Fed is still very cautious in its approach to monetary tightening. It did, however, downgraded the headwinds due to foreign market turblence, as it dropped the word "risk" tied to international developments, an omission that some Wall Street pros say at least leaves the door open to a rate increase in June.
The Dow Jones industrial average extended its gains after the Fed announcement, and finished up 51 points, or 0.3%, despite the fact that Apple is a Dow component and fell 6.3% after last night's earnings miss. The broader Standard & Poor's 500 stock index climbed 0.2%. The Nasdaq dropped 0.5%.
The Fed statement provided a mixed picture of the economy, emphasizing the improving labor market and noting that “strong job gains” likely herald a further pickup but acknowledging that economic growth “appears to have slowed.”
The Fed, of course, hiked rates back in December for the first time in nearly a decade, but have not pulled the trigger since and their communications has consistently stressed that they are in no rush to hike rates amid a slow U.S. economy, still-weak inflation and continued overseas challenges.
"The omission of the warning about global risks leaves the door open to a June rate hike, but whether the Fed follows through will depend on what happens in financial markets over the next six weeks," Paul Ashworth, chief U.S. economist at Capital Economics, told clients in a note.
The storyline for the tech sector has turned negative in recent days amid a number of disappointing earnings reports from key players in the sector, ranging from Apple's (AAPL) first ever quarterly drop in iPhone sales reported after last night's close to high-profile misses late last week from Microsoft (MSFT) and Google parent Alphabet (GOOGL).
Weak earnings in the high-priced tech-stock space has pushed the Nasdaq down four straight sessions and is weighing on prices early Wednesday, with the Nasdaq down around 1%.
Apple misses by a mile: Wipes out $43B
Oil is on the rise, however, with U.S.-produced crude gaining 1.9% to $44.89. Crude oil rose as high as $45.18 a barrel, hitting its highest level of 2016.
Wall Street continues to view Fed as friend not foe
The first quarter earnings season, which wasn't expected to be a great one, has proved to be challenging, especially for tech stocks. Not only did Apple fall shy of estimates last night, Twitter (TWTR) also fell short of revenue estimates, driving its shares down nearly 15% in pre-market trading.
In earnings reports before Wednesday's opening bell, Dow component and aerospace giant Boeing (BA) fell shy of profit estimates but topped the bar on revenues. Boeing shares, however, were off around 1.4%. Retail restaurant chain Buffalo Wild Wings (BWLD) also reported weak sales, pushing its stock down nearly 13%.
Stocks around the globe were muted ahead of the Fed decision and following the unsettling earnings reports. In Asia, Japan's Nikkei 225 fell 0.4%, while stocks in Hong Kong dipped 0.2% and shares in mainland China's Shanghai composite fell 0.4%.
In Europe, shares were faring better and were at their highs of the day. The broad Stoxx Europe 600 index was 0.3% higher.