U.S. Stocks Close Mostly Lower Following Post-Fed Volatility

(RTTNews) - Stocks saw substantial volatility following the Federal Reserve's monetary policy announcement on Wednesday before eventually ending the session mostly lower. With the decrease on the day, the major averages added to the steep losses posted on Tuesday.

The major averages finished the session just off their worst levels of the day. The Dow slid 270.29 points or 0.8 percent to 33,414.24, the Nasdaq fell 55.18 points or 0.5 percent to 12,025.33 and the S&P 500 dropped 28.83 points or 0.7 percent to 4,090.75.

The lower close on Wall Street came after the Federal Reserve announced its widely expected decision to raise interest rates by another quarter but appeared to signal a potential pause in rate hikes.

The Fed decided to raise the target range for the federal funds rate by 25 basis points to 5 to 5.25 percent, making the tenth straight rate hike.

The unanimous decision to continue raising rates came as the Fed noted inflation remains elevated while also observing that job gains have been robust in recent months and the unemployment rate has remained low.

Notably, however, the Fed omitted a sentence included in the March statement that said the central bank "anticipates that some additional policy firming may be appropriate" to return inflation to 2 percent over time.

The Fed also tweaked language regarding the outlook for monetary policy, saying "the extent to which additional policy firming may be appropriate" rather than "the extent of future increases in the target range."

However, Fed Chair Jerome Powell's comments during his post-meeting press conference led to renewed uncertainty about the outlook for rates.

Powell said the central bank would take a "data-dependent approach" to future monetary policy decisions and stressed a decision on a pause was not made at the meeting.

The next monetary policy meeting is scheduled for June 13-14, with CME Group's FedWatch Tool currently indicating an 87.1 percent chance the Fed will leave rates unchanged.

"The Fed signaled that there will likely be a pause in June, but it came with a caveat that the FOMC remains highly attentive to inflation and is data dependent," said Ryan Sweet, Chief US Economist at Oxford Economics.

"In other words, if there is any upside surprise to inflation, the central bank won't hesitate to resume hiking interest rates because they're determined to break inflation's back," he added. "As such, there is a risk that the pause is temporary."

Sector News

Oil service stocks extended the sell-off seen during trading on Tuesday, with a continued nosedive by the price of crude oil weighing on the sector.

With crude for June delivery plummeting $3.06 to $68.60 a barrel, the NYSE Arca Oil Index tumbled by 2.2 percent to its lowest closing level in over a month.

Substantial weakness also emerged among financial stocks, dragging the NYSE Arca Broker/Dealer Index and the KBW Bank Index down by 2.2 percent and 1.9 percent, respectively.

Semiconductor, tobacco and chemical stocks also came under pressure over the course of the session, while significant strength remained visible among computer hardware and airline stocks.

Other Markets

In overseas trading, stock markets across the Asia-Pacific region moved mostly lower during trading on Wednesday, with markets in Japan and China closed for holidays. Hong Kong's Hang Seng Index dove by 1.2 percent, while South Korea's Kospi slid by 0.9 percent.

Meanwhile, the major European markets moved to the upside on the day. While the German DAX Index climbed by 0.6 percent, the French CAC 40 Index rose by 0.3 percent and the U.K.'s FTSE 100 Index edged up by 0.2 percent.

In the bond market, treasuries extended the rally seen over the course of the previous session. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.6 basis points to 3.403 percent.

Looking Ahead

Trading on Thursday may continue to be impacted by reaction to the Fed announcement, while reports on weekly jobless claims, the U.S. trade deficit and labor productivity are also likely to attract some attention.